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Key Challenges and Opportunities for Housing Affordability and Stability in 2026
As we enter the new year, and America’s affordability problem grows, housing remains in the spotlight. States and cities continue to face challenges to housing supply, affordability, and stability. Compounding these challenges, budget shortfalls and uncertainty around funding sources affect many.
Housing Matters spoke with Urban Institute experts on affordability, homelessness, climate change, and housing finance to find out what they see as the biggest housing challenges facing states and localities this year—plus what they view as the most promising housing actions to address these issues.
Samantha Batko, Senior Fellow, Preventing and Ending Homelessness Practice Area Lead
Key challenge: Evidence shows homelessness is primarily driven by unaffordable housing, and far too many US households continue to struggle to afford rent, experiencing severe housing cost burden and all the challenges associated with that economic condition. Additionally, proposed changes in federal policy threaten to change and restrict housing assistance for millions, including nearly 200,000 people who previously experienced chronic homelessness who are currently living in supportive housing that’s funded, at least in part, by federal resources.
Promising solutions: When communities implement housing-based solutions to homelessness, as opposed to punitive, criminalizing policies, we see the number of people experiencing homelessness and the amount of time people spend homeless decrease. Helping people exit homelessness quickly is the best way to reduce the prevalence and harm of homelessness in communities.
Learn more:
- Evaluation of Denver’s All In Mile High Initiative
- Homelessness and Housing Program Trends by State
- Evidence Shows Permanent Supportive Housing Helps People Exit Homelessness. A Proposed Funding Change Would Cut Those Programs.
Michael Neal, Senior Fellow, Housing Finance Policy Center Lead
Key challenge: The biggest housing challenge is the risk, to the upside or to the downside, posed by the evolving stance of monetary policy in the face of uncertain and fluid economic conditions. Over the year, too tight a policy stance could continue to keep buyers sidelined, a situation amplified if labor market conditions deteriorate. Less demand would undermine property values. Absent a recession, too easy of a policy stance may, with current level of housing inventory, be offset by accelerating house prices. The impact of purchases of mortgage-backed securities by Fannie Mae and Freddie Mac will bear close watching.
Promising solutions: I have been encouraged by housing solutions that provide multiple housing supports. Alexandria, Virginia’s Flexible Homeownership Assistance Program provides no-interest, deferred down payment and closing cost assistance to first-time homebuyers purchasing a home through the Affordable Set-Aside Homebuyer Program, Neighborhood Stabilization Program, and Resale Restricted Homeownership Program. This program can promote greater housing equity at closing with the potential for purchasing an affordable property.
Learn more:
- How Higher Mortgage Interest Rates Can Widen Racial Gaps in Housing Wealth
- Why Have Mortgage Rates Gone Up So Much?
- Housing Finance at a Glance: A Monthly Chartbook
Andrew Rumbach, Senior Fellow, Climate and Communities Practice Area Colead
Key challenge: One important challenge is for states and localities to continue building housing resilience to fires, floods, and other climate extremes, even as federal resources for hazard mitigation and climate change adaptation dry up.
Promising solutions: One example out of Alabama is the Strengthen Alabama Homes Program, which provides grants to homeowners to install a fortified roof that is less susceptible to rain and wind damage. The program is supported by the insurance industry and does not rely on state or federal funding but involves significant coordination and cooperation between stakeholders at all levels.
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Peter Tatian, Senior Fellow, Research Director of Urban–Greater DC
Key challenge: Economic vacancy in affordable housing, including rising levels of nonpayment of rent, has worsened since the pandemic. High levels of economic vacancy can lead to rental market instability and can threaten the viability of affordable housing developments. It can also lead to higher rates of eviction, displacement, and homelessness. Housing providers in DC have raised this issue with local leaders, and a recent report from LISC highlights the challenge in New York.
Promising solutions: Organizations such as members of the DC Eviction Prevention Co-Leaders group and HomeStart’s Renew Collaborative are working with housing providers on strategies to help stabilize tenants. These collaborative approaches are essential to finding meaningful and lasting solutions to the problem of economic vacancy.
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