What are cross-subsidies?
This policy also has been used to create mixed-income developments comprised entirely of rental homes. In areas with very high market rents for non-luxury homes, such developments can work without significant public subsidies or with only a modest subsidy. In some markets, at certain times, however, the development of market-rate rental units is less profitable, leaving little profit available in most markets to subsidize the affordable units. In order to rectify this problem it is necessary to find a different method of promotion and subsidy.
To use cross-subsidies successfully in an all-rental context outside of very high rent areas, communities may need to combine cross-subsidies with other approaches, such as making publicly owned land available for little or no cost, or increasing the allowable density of a development to provide greater opportunities for profits that can help offset the costs of affordable homes.
What problems does this policy solve?
Where is this policy most applicable?
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