Why not provide interest-free loans on multi-unit construction instead, something that can get built right away?
Is this a substantially different idea from what the feds are already doing? They are currently working with various cities to update zoning laws to allow for easier building of higher density in exchange for the feds spending a bunch of money to subsidize building homes in the city.
Providing interest-free lones to developers feels like a similar program with different pros and cons.