"Housing" appears on a local partnership agenda when the independent efforts of private enterprise and government fail to satisfy community needs for decent and affordable housing. In urban centers, evidence of this failure may include the highly visible presence of the homeless, dilapidated apartment buildings, and the more insidious phenomenon of middle-class families relocating from areas with a chronic shortage of housing and a lack of stable neighborhoods. The failure may also emerge in rural areas where the elderly are unable to keep up their homes, as well as in affluent suburban communities where the younger generation has been priced out of the local housing market. And, virtually everywhere, a disproportionately inadequate supply of affordable housing is apparent among racial and ethnic minorities.
Although the manifestations of housing problems vary among localities, solutions universally depend on the cooperative application of both public and private resources in some form of housing partnership. The concept of a public-private partnership in housing is a commitment to sharing development risk, financial obligations, and program responsibilities among government, private financial institutions, builders, developers, and — to the maximum extent possible — nonprofit organizations and the larger business community. This shared commitment and exposure to financial risk allows the community to form a consensus on a response to its housing needs. Successful program implementation generally requires a formal and institutionalized public-private vehicle, with a mandate to serve as the intermediary agent for all participants in the partnership program.
When interest rates and the national economy are relatively stable, a serious imbalance between housing needs and supply can be attributed to three conditions. First, the cost of building and maintaining housing exceeds what people can afford to pay for it (known as the "affordability gap"). Second, the cost of building and maintaining housing is greater than its market value, as determined by what people are willing to pay for housing in a given location. Third, the profitability of private development, ownership, or investment in housing is insufficient, often because of government-imposed regulation or taxation that is not offset by public subsidy incentives.