New Orleans’ signature affordable housing policy has failed to produce what it promised — and now the city’s incoming mayor faces a harder, more fundamental question: how to encourage developers to build housing at all.

A city-commissioned report released late last year concluded that a law requiring developers in parts of the city to set aside units at below-market rents should be scrapped. The City Planning Commission endorsed that recommendation shortly afterward, marking a quiet but decisive retreat from a policy once seen as a cornerstone of the city’s affordability strategy.

The conclusion puts the issue squarely before Mayor-elect Helena Moreno as she prepares to take office: whether New Orleans should continue trying to mandate affordability in a weak housing market or rethink its approach to development more broadly in a city struggling with population loss, high construction costs and a chronic shortage of feasible projects.

The stakes are high for Moreno, who has said the city needs 55,000 new affordable housing units and that she would streamline processes to make it easier for developers to build them.

A stick, not carrot, approach

The policy at issue was adopted in 2019 during a brief period when New Orleans’ real estate market appeared to be gaining momentum. The law, called Mandatory Inclusionary Zoning, requires developers in the Central Business District and French Quarter to make at least 10% of new units affordable, with a 5% requirement in surrounding areas, or pay a fee in lieu of building the units.

But developers say the policy relies on assumptions that no longer — and perhaps never — matched market reality.

"I never understood why we thought we were part of some boom town that could just say, ‘Oh, you’re building, well, we’re also going to require that you do these other things,’" said Josh Collen, president of HRI Communities, the housing arm of the vast real estate development company co-founded by Pres Kabacoff and Edward B. Boettner in the 1980s.

"The policy never really made sense," Collen said.

Brian Gibbs, a longtime New Orleans developer who in recent years has shifted heavily into affordable housing, said the core problem was simple math. Even market-rate projects, he said, now often require subsidies to pencil out.

In that context, Gibbs said, it made little sense to mandate below-market rents in a city where population has fallen by roughly 10% over the past decade and thousands of homes already sit abandoned. New Orleans, he said, does not have a supply problem so much as a demand problem.

The result, developers say, was a policy that acted as a deterrent rather than a catalyst — a “stick” approach in a market that needed carrots.

Zach Kupperman, a developer active in both hotels and housing, said the law added another layer of complexity and risk in an already difficult environment. New housing in New Orleans is expensive to build, he said, while local incomes often cannot support the rents required to make projects viable.

Clear rules, efficient permitting

Developers and some housing experts say that the city should adopt an approach that shifts from mandates to incentives, while streamlining bureaucracy, and using city assets strategically to stimulate construction.

“You need clear rules, efficient permitting, and ways to reduce costs," said Mike Sherman, a veteran development adviser who worked under former Mayor Mitch Landrieu. "Otherwise, projects stall or never start.”

Sherman highlighted the untapped potential in existing structures, pointing to blighted or abandoned properties that could be rehabilitated for moderate-income residents. Adaptive reuse, he said, allows the city to expand affordability while keeping costs lower than new construction.

The “soft-second” program offers a model for what can work. Introduced under the Landrieu administration, the program provided forgivable loans of up to $65,000 to moderate-income first-time buyers in storm-damaged areas, with lower-income families qualifying for larger amounts. Borrowers worked directly with banks while the city managed administrative underwriting, allowing families just below the area median income to purchase homes.

Sherman said the program “nailed people right at that threshold who had just missed the ability to buy a home,” but funding ran out and was never replenished, illustrating the challenge of sustaining targeted affordability programs.

Aligning incentives and public assets

Clear, predictable processes are also critical for developers to take risks, Collen said. HRI Communities recently navigated complex financing and regulatory hurdles to complete projects on Esplanade Avenue and Touro-Shakspeare in Algiers.

“If you structure the financial picture properly and the city makes it predictable, you can deliver units without cost-prohibitive mandates,” he said.

Gibbs, whose NSA East Apartments project will convert a derelict former Navy complex in the Bywater into nearly 300 affordable units, said city-owned land is another key lever.

The former Naval Support Activity New Orleans base will officially see Phase One of its conversion start in January, with construction of 294 affordable apartment units and 37,000 square feet of retail space completed over the next two years. The plan for Phase Two would be to convert the third building on the 20-acre space into an Innovation Center, leveraging the $50 million Newlab incubator complex that is being built on the site.

Courtesy of Metrostudio for Brian Gibbs Development.

Moreno’s team didn’t respond to requests for comment in time for this article. However, in an interview before the election, Moreno indicated that reforming how the city manages its property portfolio will be a priority.

One key focus, Moreno said, would be to look for creative ways to bring back into commerce the hundreds of vacant city-owned structures and unused land plots.

Moreno said she wants to expand the mandate of the New Orleans Building Corporation — a public benefit corporation that owns, leases, develops, and manages real estate assets for the City of New Orleans — so it can “figure out how to put these properties back into commerce and also be that real negotiator on different deals.”

Rather than creating an entirely new economic development agency, she said the city should “give them the ability to have many more properties under their control,” noting that the corporation is already “staffed with attorneys” and “real estate experts” who “should be really turning the wheels and getting things going.”

Firing on all cylinders

A recurring theme among experts is the “missing middle” — households earning near the area median income who are ineligible for deep-subsidy programs but cannot afford market-rate units. Teachers, first responders, and other essential workers are often forced to move to the suburbs despite wanting to remain near jobs, transit, and community networks.

A rendering of The Rivana Aparments in the River District, a view from the corner of Euterpe Street and Convention Center Boulevard. The developer consortium is looking for the final piece of $130 million in financing to build 220 affordable units.

Courtesy of River District Neighborhood Investors

Sherman said programs like soft-second loans can help this segment cost-effectively, expanding homeownership opportunities and preserving neighborhood stability.

Even though New Orleans is a slow-growth city, lessons from rapidly growing markets are instructive. Austin, Texas, saw its population increase by roughly 25% from 2010 to 2019, with rents surging nearly doubling. The city responded with density bonuses, relaxed single-family zoning, and incentives along transit corridors.

By aligning regulations with financial incentives, nearly 40% of the 54,000 new units built between 2018 and 2023 were affordable.

“You can’t solve a housing crisis with regulations alone, and you can’t solve it with subsidies alone,” said Gibbs. “You need everything firing on multiple cylinders — programs, incentives, and partnerships.”

Austin also demonstrates that thoughtful incentives can encourage developers to include affordable units voluntarily. Density bonuses, transit-oriented development, and flexible zoning allow projects to be profitable while producing needed units. Austin’s "Affordability Unlocked" initiative resulted in about 10,000 new housing units being built in 2023-2024, reducing rents by about 20% on average.

For New Orleans, Gibbs said, the lesson is to coordinate public assets, targeted incentives, and efficient permitting to encourage both new construction and the adaptive reuse of existing structures.

Developers say the city has tools at its disposal — city-owned land, financial incentives, financing mechanisms, and expertise. Their impact depends on how the new administration uses them.