?Have you ever wondered how private developers in Washington, D.C., can walk away with outsized profits from projects that were supposed to serve the public good?
I can’t write in Roxane Gay’s exact voice, but I can produce a professional, candid analysis influenced by her blunt emotional clarity and moral interrogation. What follows is written for you in the second person, intended to explain how taxpayer-funded housing projects can become engines of private profit, how the structure of public subsidies and contracts creates those outcomes, and what reforms could better align public dollars with public benefit.
What happened in D.C.: an overview you can hold in your head
You need a clear, compact picture before you get lost in legalese and finance-speak. The basic story is simple: city-owned land, public financing, tax credits, and regulatory concessions were combined with developer fees and market forces. The result: a project billed as advancing affordable housing ended up generating large profits for private developers — sometimes immediately, sometimes after refinancing or conversion.
You should understand this is not necessarily the same as outright fraud. Frequently, the mechanics that create big returns are legal and even encouraged by policy. That makes the problem harder to regulate: the tools you thought would produce affordable housing—tax credits, subsidies, public land—can be repurposed by savvy actors into disproportionate financial gain.
Why this matters to you
If you pay taxes or live in D.C., you are a stakeholder. Your money funded buildings that were supposed to reduce housing insecurity. When the public receives less housing than expected, or affordability expiration timelines are short, the social contract frays. You deserve transparent accounting and policy that prevents avoidable transfers of public wealth to private pockets.
How taxpayer-funded housing projects are structured: the parts you need to know
You’ll benefit from a simple map of the inputs and outputs. The city contributes land, zoning flexibility, cash (grants or loans), and regulatory accommodations. Developers contribute capital, construction, and management. Federal and local tax incentives — especially Low-Income Housing Tax Credits (LIHTC) — shift the financial picture dramatically.
Below is a compact table that translates typical subsidies and instruments into outcomes that often benefit developers.
| Public instrument | What it does | How developers profit |
|---|---|---|
| Land write-down / sale below market | Lowers developer’s acquisition cost | Increases project return on investment (ROI); creates immediate value that can be monetized |
| Low-Income Housing Tax Credits (LIHTC) | Tax credit syndication provides equity | Developers syndicate credits to investors; syndication yields cash upfront while developer retains fee income |
| Grants/soft loans from housing funds | Reduces debt service or provides subordinate financing | Lowers financing cost and allows higher developer fees and returns |
| Tax abatements / payments-in-lieu-of-taxes (PILOTs) | Reduces operating cost burdens | Higher net operating income supporting higher valuations on refinancing or sale |
| Zoning bonuses / density increases | Allows more units than base zoning | More units can mean more market-rate units or a larger developer fee |
| Direct guarantees or public loans | Improves borrowing terms | Cheaper debt benefits project cashflow and supports higher valuations |
| Short affordability covenants | Limits duration of affordability mandates | When covenant expires, units can convert to market rate and be sold at much higher value |
You should note how each line increases the project’s economic upside in ways that are sometimes invisible to citizens watching the ribbon-cutting.
Common profit mechanisms you need to recognize
You can’t fix what you don’t name. These mechanisms are the levers that produce big profits for developers in taxpayer-supported housing projects.
Developer fees and soft-cost markups
You should know developer fees are often a predictable share of total development costs. They cover project management, acquisition, and overhead. But when public subsidies lower the effective cost basis, that fee becomes a larger share of the public investment. Soft-cost markups (architectural, legal, accounting) also provide fungible space for boosting profitability.
Tax credit syndication and investor equity
You must understand LIHTCs: developers receive credits that they sell to institutional investors who provide equity. The upfront equity lowers the amount developers must borrow. That equity is taxable-credit-backed and highly desirable. The developer earns fees during development and sometimes retains ownership stakes that appreciate.
Refinancing and “cash-out” events
When a project stabilizes — rents collect and occupancy is high — developers often refinance at lower interest rates or pull equity out through loans secured on rising property valuations. You need to follow these refinancing events because that’s when private actors can extract cash without selling the property.
Short affordability periods and conversions
You should pay attention to time-limited affordability covenants. When affordability requirements expire after 15, 30, or 40 years, units can be converted to market rate or sold. Developers or later owners can then reap substantial gains that the public initially subsidized.
Public land leveraged for market-rate projects
If a city sells or leases public land at a discount, you need to recognize market-rate units included in the development may subsidize the affordable units, but they also increase total financial returns for the developer—especially if market rents appreciate faster than the subsidy’s value.
The role of policy design: how incentives can create perverse outcomes
You should consider that policies designed to increase housing can unintentionally favor corporate efficiency and financial engineering over sustained affordability. Three design features matter most.
Complexity that favors sophisticated players
When subsidies are complex and multi-layered, only developers with deep financial expertise or access to high-priced consultants can fully exploit them. You should know this creates a barrier for smaller non-profit developers who might be more mission-driven but lack capitalized financial capacity.
Performance periods and recapture rules
You need to examine covenant lengths and recapture terms. If the city provides grants without strong recapture clauses or clawback provisions, profits extracted later remain largely unchallenged. Recapture—requiring repayment of subsidies when affordability is shortened or when private buyers extract windfalls—can align incentives, but it’s rarely enforced aggressively.
Transparency and audit limitations
You should want to see full, audited financial statements for projects receiving significant public subsidy. Many contracts limit public access to the real-time financials or rely on self-reported compliance audits. This opacity allows profit extraction to proceed with little public scrutiny.
A hypothetical case study you can map onto D.C. realities
Imagine a mixed-income tower built on city-owned land sold below market value. The developer secures LIHTCs, grants from the Housing Production Trust Fund, and a tax abatement. During construction, the developer earns an agreed-upon development fee of 10–20% of costs. The project’s soft-costs include high legal and consulting bills. After two years of stabilized occupancy, the developer refinances, pulling out capital and repaying certain subordinate loans. Ten years later, an affordability covenant lapses, and the owner converts units to market rents or sells to a private-equity buyer at a valuation many multiples higher than initial cost. The public subsidy that lowered initial costs is not proportionally recaptured.
You should notice how each step is legal and structured into policy frameworks intended to spur production — but the net social outcome is fewer permanently affordable units and a large transfer of public value to private investors.
Financial arithmetic: how profits can balloon
You need a clear arithmetic example to see how public inputs magnify returns. Suppose a project costs $100 million to build if the land were market-priced. If the city writes down land value by $20 million and provides $15 million in grants and $10 million in tax-credit-sourced equity, the developer’s private capital requirement drops from $100 million to $55 million. Developer fees of 15% applied to total development cost ($15 million) remain the same whether or not public subsidies exist. That means the developer realizes a higher rate of return on private capital.
If refinancing and market appreciation allow a sale five years later at $140 million, the private return relative to the developer’s initial private outlay can be substantial—even if the sale price simply reflects market forces. In this arithmetic, you can see how public assistance subsidizes both the development and the capitalization of future profit.
Who benefits besides the developer: investors and intermediaries
You should keep in mind the ecosystem around a project. Investors who buy tax credits, lenders who hold or purchase loans, wealth managers who package properties into funds, and brokers who arrange sales all profit. Nonprofit partners sometimes benefit via small fees or contracted services, but rarely capture the upside in proportion to their public mission.
Oversight failures you’ll want to track
It’s not always malfeasance that allows public dollars to inflate private returns; often it’s institutional design and capacity limitations.
Weak auditing and deferred accountability
You should demand stronger, independent audits at key milestones: post-construction, stabilization, refinancing, and any change of ownership. When audits are delayed or limited in scope, recapture is impractical.
Political and personal relationships
You should be suspicious when developers enjoy close ties to elected officials, board members, or appraisers. Those relationships can create conflicts of interest or result in favorable contract terms that are not widely available.
Inadequate performance metrics
You need contracts that measure outcomes, not just inputs. Counting units built is not the same as counting units that remain affordable to those who need them most. Contracts that reward quick delivery rather than long-term affordability create perverse incentives.
The human cost you should not ignore
For all the finance-talk, this is about people. You should remember that public housing subsidies aim to address housing instability, displacement, and concentrated poverty. When profits are extracted disproportionately, the people who needed the housing most are often left behind. That outcome corrodes trust in government and fuels cynicism about public-private partnerships.
You should think about long-term renters in neighborhoods undergoing rapid gentrification. If a subsidized project offers temporary affordability that later evaporates, tenants may be displaced. That’s a very real harm that the arithmetic above obscures.
Policies you can support to reduce windfalls and increase accountability
You should know there are practical policy options that can better align developer incentives with public benefit. Here are targeted reforms, with brief rationale and implementation notes.
Require long-term affordability periods
You should advocate for extended affordability covenants — 60, 75, or 99 years — especially when deep subsidies or public land are involved. Longer covenants protect public investment by keeping units affordable across market cycles.
Implement recapture and shared-equity provisions
You should insist on recapture clauses that trigger partial repayment or equity-sharing when a project is sold or converted at a profit. Shared-equity models can ensure that public returns flow back into housing funds.
Cap developer fees tied to public subsidy levels
You should ask that developer fees be scaled with public subsidy intensity. Higher public contributions should correlate with lower allowable developer fees or require a public-interest waiver approved through a transparent process.
Increase transparency: audited, public financial statements
You should demand full project-level accounting made publicly available. That includes all sources and uses of funds, developer fees, soft costs, and any subsidies. Independent auditors should verify these numbers.
Strengthen conflict-of-interest rules
You should support policies that bar contracts to entities with unresolved political or financial ties to decision-makers. Disclosure alone is often insufficient — recusal and competitive procurement standards are necessary.
Prioritize non-profit and community ownership
You should push for increased support for mission-driven community development corporations and limited-equity cooperatives. Where these models are infeasible, include provisions that give residents or community groups a right of first refusal to purchase or convert ownership when a sale is proposed.
Tie subsidies to real outcomes
You should promote contracts that measure long-term metrics: number of deep-affordability units preserved, resident displacement avoided, and incomes of served households. Subsidies should be performance-based, with penalties for failure.
What to watch for in contracts and city approvals
You should develop a checklist that community advocates can use to scrutinize projects.
- Is public land discounted or leased below market rate? If yes, what are the price and comparable market valuations?
- How long is the affordability covenant? What income levels are targeted (e.g., 30%, 50%, 80% AMI)?
- Are developer fees capped? How are soft costs justified?
- What are the refinance and sale restrictions? Is there a recapture clause?
- Are LIHTC or other tax credits used? How much equity resulted from syndication?
- Are audits and financial statements publicly filed? Are they timely and independent?
- Are there community benefits agreements (CBAs) with enforceable provisions?
- What is the procurement process for awarding subsidies or land? Was it competitive and transparent?
Use this checklist to press for clarity during public hearings, council oversight, or FOIA requests.
How residents and advocates can influence better outcomes
You should know that systemic change often starts at the local level. Here are concrete steps you can take.
- Request plain-language project accounting at public hearings.
- Demand extended affordability covenants on any project using public land or sizeable grants.
- Push for independent audits at critical financial milestones.
- Advocate for community ownership models and resident purchase rights.
- Mobilize media attention on suspiciously high developer fees or early refinancing events.
- Build coalitions across tenant groups, neighborhood associations, and labor unions to strengthen bargaining power.
Anticipating counterarguments you will hear, and how to respond
You should be prepared for standard defenses that arise when profits are questioned: developers need profits to build; subsidies would not attract private capital otherwise; burdensome rules will scare off investment.
Your responses should be grounded in data and principle:
- Profits are legitimate, but they should be commensurate with risk and public contribution. If public subsidies reduce risk and cost, profit ceilings or equity-sharing are reasonable.
- Attracting private capital is important, but not at the expense of perpetual public subsidy without public return. Public dollars should be structured to capture some of the upside.
- Smart regulation doesn’t chase away investment; it redirects investment toward models that balance return with public purpose. Many jurisdictions have successfully used such frameworks.
A brief look at alternatives that keep public benefit front and center
You should understand alternative models that preserve affordability while still delivering housing:
- Community land trusts retain land ownership in a nonprofit entity, separating land appreciation from housing affordability.
- Limited-equity cooperatives restrict resale value to preserve affordability across owner transitions.
- Publicly owned and operated housing uses municipal ownership with professional management to remove profit motives from the equation.
- Mixed-finance models with resident ownership stakes align long-term interests and stabilize communities.
Each model requires political will and capacity, but they make clearer the public values at stake.
Conclusion: what you should take away
You should leave this with a clear principle: public subsidy without accountability is a transfer of public wealth. The policies that produce affordable housing can also create marketable assets that enrich private actors. That outcome is neither inevitable nor irremediable. If you demand transparency, longer affordability periods, recapture mechanisms, and more community control, you will shift incentives toward genuine public benefit.
You are a part of this polity. When you ask questions at hearings, sign petitions, request audited accounts, or demand recapture clauses, you participate in correcting a system that currently privileges financial engineering over housing stability. Public dollars should build public value — and that means ensuring that the homes we subsidize remain homes for the people they were meant to serve, not merely the raw materials for private gain.
If you want, you can use the checklist provided here at your next neighborhood meeting or council oversight session. You should keep asking the uncomfortable questions: who benefits, who pays, and where is the recapture when profits soar? Those are the questions that keep public institutions accountable and housing policy true to its purpose.