The affordable housing crisis is one of today's most pressing sustainability challenges, affecting economies across the development spectrum. In this episode of INSEAD Explains Sustainability, Assistant Professor of Finance Pierre Mabille outlines how policymakers and businesses can tackle this crisis in the short and long run.

The challenge, says Mabille, lies in reconciling general welfare objectives with individual business incentives while implementing measures and incentives to bolster supply.

Mabille proposes several promising strategies. First, tax incentives and breaks can make developing affordable housing more attractive to investors. These initiatives could be better targeted geographically and focused on creating specific numbers of affordable units rather than percentage requirements. 

Second, government guarantees on rent payments, similar to France's VISALE scheme, can help reduce risk for property owners while expanding access to housing.

More innovatively, policymakers could take a leaf out of the ESG (environmental, social and governance) playbook. Just as sustainability-focused ESG investors have been willing to accept lower short-term returns for environmental impact, similar frameworks could be developed for affordable housing projects. This could be combined with expanded use of real estate investment trusts, or REITs, to broaden the investor base and create deeper markets for affordable housing investments.