Privately financed affordable housing (PFAH) has become one of the most important developments in the housing field over the last six years. It is housing built with private capital, enabled by new zoning and regulatory incentives, and made feasible through cost discipline and creative financing often without the traditional layers of government subsidy.
For health plans, understanding this model isn’t an academic exercise. It’s a reminder of what’s possible when policy, capital, and mission line up and what role payers can play in shaping supply for the members who need it most.
Cities and states have opened doors that didn’t exist a decade ago.
The thread running through each case: when local government cuts red tape and increases allowable density, private developers step in to build at below-market rents.
Private developers make these deals work by keeping costs low and capital stacks simple. Impact investors provide equity at modest returns; banks supply debt; and costs are contained through modular design, standardized floorplans, and value engineering.
Importantly, indirect public supports still matter. Section 8 vouchers stabilize rent rolls. Tax abatements reduce operating costs. But the expensive, multi-layered underwriting tied to tax credits is avoided cutting per-unit costs in half in some Los Angeles projects.
Most PFAH projects target households between 60–100% of Area Median Income the “missing middle” who don’t qualify for subsidies but can’t afford new market rents. Teachers, retail workers, CNAs, first responders.
With vouchers layered in, the model also stretches to formerly homeless or extremely low-income members. In those cases, the member pays a small share of income, while federal rent supports bridge the rest making even supportive housing possible without capital subsidy.
These are “no-frills modern” apartments: smaller units, durable finishes, fewer amenities. No rooftop pool, but often a community room and onsite management. Reduced parking is common, which saves cost and reflects tenant realities. Increasingly, modular construction keeps projects fast and affordable.
The trade-offs are intentional: safe, code-compliant housing delivered at scale, rather than a handful of gold-plated units that take years to finish.
Affordability periods range from 30 to 55 years under programs like Live Local or California’s density bonuses. That means stability is preserved for decades but health plans and policymakers should remain alert to what happens when covenants expire.
The equity lesson: this model expands supply for working families and can house vulnerable members quickly when paired with vouchers. But safeguards are needed to avoid displacement (for example, replacing demolished rent-controlled units one for one).
For payers, PFAH is more than a housing trend. It’s a lever for:
Florida’s sweeping preemption, California’s density bonus toolkit, and Austin’s layered incentive program are early blueprints. Each demonstrates that when incentives are large enough and predictable enough, private capital can deliver affordability at scale.
Health plans don’t need to become developers. But they do need to be fluent in these models, advocate for them in policy discussions, and partner strategically through rent supports, onsite services, or impact investment so that when units open, their members benefit first.
Privately financed affordable housing isn’t a silver bullet. Deep subsidy will always be required for the lowest-income populations. But it’s a reminder of what’s possible: affordable units delivered faster, with private dollars, at a cost structure that works.
For health plans, this is not just an urban planning story. It’s a playbook for stabilizing members, bending cost curves, and shaping healthier communities if we step in as partners, not bystanders.
Upside Corporate Headquarters
200 E Las Olas Blvd 14th Floor
Fort Lauderdale, FL 33301
