Introduction

Picture waking before the sun has risen, hastily making yourself some peppered scrambled eggs, snatching an almost-too-ripe banana from the counter, and swallowing breakfast in a hurried blur before rushing out the door. Hours later, you return to your cramped, shared room, with a Late Rent Notice sitting on top of your handmade bowl of keys, and the last golden streaks of sunlight fading beyond the horizon. You are exhausted from another day of hard work and yet still unable to stably afford a place of your own. For millions of people around the world, especially in the United States, this is unfortunately becoming an increasingly prevalent reality. As rents and homelessness rise, people have pressured governments to take more actionable measures and take steps to help the community. But when housing is too expensive for the private market to provide affordability, can government ownership truly change the economics of housing —or does it simply shift the cost to taxpayers? That is the question we will journey with today. 

When Governments Take the Lead: Singapore and Vienna

Singapore offers a great example of what happens when a government actually takes a major role in housing. Its Housing & Development Board has built more than one million flats, housing around 80% of  Singapore’s resident population. Rather than reserving public housing only for the poorest residents, Singapore has made it a central part of its greater housing system. Vienna, Austria takes a different but similar approach. The city combines municipally owned apartments with subsidized housing built by limited-profit housing associations (LPHAs) required to prioritize affordable housing over maximizing profits. Together, this combined model covers roughly 60% of the city’s population and ensures residents have alternatives to renting solely from the control of private landlords. 

Both Singapore and Vienna show that governments can influence not only how much housing gets built, but also who owns it and how affordable it remains. However, these approaches depend on specific policies and institutions that would be difficult to reproduce in the United States. In Singapore, the government’s extensive control over land allows it to acquire property for public development and coordinate large-scale housing construction easily. Additionally, they use the Central Provident Fund (CPF), a mandatory savings program funded by employers and employees, to help citizens purchase homes. Replicating this system would require major changes to American land ownership —which has historically and currently relied more heavily on privately owned land and profit-driven developers— as well as changes to retirement savings policies —which presently have very limited housing integration. On the other hand, Vienna’s model relies on decades of public investment in government-owned apartments and LPHAs. To imitate such a model in America, building a comparable system would require a great deal of public funding, new institutional infrastructure, and a long-term commitment to affordable housing that simply cannot be established overnight. 

Ultimately, the United States’ capitalist system and history of limited government intervention in housing make adopting these models a significant institutional challenge.

Why the Private Market Leaves an Affordability Gap

In a typical market —whether for electronics, clothing, or other everyday goods— businesses respond to demand by either raising prices or increasing production. Housing, however, is more complicated because building more homes requires far more than just labor and materials. Developers must also acquire land, navigate endless permits and regulations, and make an enormous upfront investment before earning any sort of income. In cities where land is extremely scarce and demand is high, these costs can make new housing extremely expensive and difficult to build. 

Consider a private developer deciding whether or not to build an apartment building: to make a profit, the developer must not only earn enough rental income to first cover costs of construction, loan payments, ongoing maintenance, etc. but must also make money left over. If lower-income families can only afford rents that fall short of these costs, building affordable housing becomes financially unattractive and unworthwhile. Zoning restrictions can further worsen this dilemma by limiting building heights or prohibiting apartment buildings in certain neighborhoods, preventing developers from building more units to spread land costs and offer lower rents. As a result, developers have an incentive to build apartments that can command higher rents and generate greater profits. 

Furthermore, as demand for housing rises while available homes remain limited, landlords may also be able to charge higher rents because prospective tenants have fewer alternatives. Although not every developer or landlord acts solely to maximize profit, it is certain that the financial incentives of the private market often do not align with the need for affordable housing. This reveals a fundamental problem in the housing market: the many people who need housing the most are not always the people who can actually afford to pay for it. 

What Public Housing Really Costs

When a government decides to build and own housing, it is essentially ridding the profit motive that directly powers the private market. However, bypassing the profit motive does not mean bypassing the actual costs. Bricks, steel, plumbing, and union labor still cost the exact same amount of money regardless of whether a private developer or a city council is signing the checks. Cheap rent doesn’t necessarily mean cheap housing. Public housing is special in that it is often owned for decades, and the cost isn’t just the initial construction bill but the ongoing bills for factors such as management and renovations. The real economic question is not just what the ‘affordable’ home costs on the day it was built, but how much it costs to maintain it over a period of time.

 If a government were to build a residential complex and rent it out at below-market rates to help those struggling, rental income may cover operating and short-term maintenance costs —depending on the property’s expenses and rental revenue. However, if rents cannot recover the full enduring costs of construction, major repairs, and long-term maintenance, etc., the government may need to make up the difference through continuous subsidies and public funding.

Furthermore, simply allocating public funds to build housing doesn't eliminate issues such as land scarcity. In cities where only a limited amount of land is available for development, governments must compete with private developers for the same tiny slivers of legally buildable land, raising property prices, increasing the cost of building public housing while the monetary limits of the tenants remain unchanged —potentially placing a greater burden on taxpayers.

Building Homes vs. Changing the Market

Hypothetically, if a city actually manages to acquire this land and build these units, will it really fix the wider housing crisis? Building public housing can help address the housing crisis in two ways. The direct effect is that each unit provides an affordable home for a household in need. The broader market effect occurs when public housing reduces the demand for private rentals, thereby easing competition and slowing rent increases. However, this effect depends entirely on scale. For instance, building 1,000 public units in a city of 5 million households will dramatically change the lives of those 1,000 families without significantly impressing the broader market. Addressing a citywide affordability crisis requires expanding housing on a far more significant scale. 

The Limits of Housing Vouchers

Since public construction is both expensive and slow, economists often debate an alternative to help make housing more affordable for low-income families: a housing voucher. This way, instead of spending hundreds of thousands of dollars plus to build and maintain a new unit for years on end, the government simply gives households subsidies to rent from a private landlord. However, though this solution is faster, more flexible, and can improve affordability for individual households by helping them cover rent, it does not directly address a shortage of available homes. If a city has a severe shortage of apartments, increased demand from voucher recipients may in fact contribute to upward pressure on rents when supply cannot match pace. These vouchers simply funnel government money to private landlords without actually improving the economics of the housing market. 

Instead, cities need more high-density developments to keep up with population growth. Rather than completely replacing the housing market, governments must look at changing the rules—through zoning reform and perhaps also faster permitting—so the private sector produces more homes, increasing supply, and restoring part of the housing landscape’s supply-demand balance. 

The Path Forward: Who Pays?

Public housing changes the equation by removing the requirement for profit, but it doesn’t erase the underlying associated costs. To make housing cheaper than its actual market rate, someone has to pay the difference. Taxpayers can fund the gap, and higher-income tenants can help cross-subsidize lower-income units. Alternatively, rather than directly subsidizing housing, physical zoning reforms can trigger a massive increase in housing supply to naturally lower prices. The core question of this current housing crisis is not whether housing can be made affordable, but who pays to make it affordable (because someone’s got to!)—and whether that cost produces enough additional housing to truly change the market itself.