As Affordability Challenges Persist, Middle-Income Housing Programs Take Center Stage

While some markets may be starting to see a slight easing in home prices, housing affordability remains a consistent challenge for many markets nationwide. To address the challenge, state and local governments have adopted policies and programs to help alleviate pressure on potential middle-income renters.

A recent working paper on this topic, “Subsidizing the Middle: Policies, Tradeoffs, and Costs of Addressing Middle-Income Affordability Challenges,” released by the Harvard University Joint Center for Housing Studies (JCHS), examines, compares and contrasts these programs adopted by government officials, regarding their potential impact and the benefits they may lead to.

“In our study, we examine 11 state and local programs that are explicitly motivated by middle-income housing needs and which provide a direct (grants, loans or donation of public land) or indirect (property tax exemption or government guarantee of construction loans, for example) public subsidy,” read a recent blog post published by Harvard’s JCHS.

For example, the study notes that the Michigan Missing Middle Housing Program was created in 2022 “to provide grants to developers to build or substantially rehabilitate properties kept affordable for households earning 60% – 120% of area median income (AMI).”

Additionally, at the local level, the Philadelphia Workforce Housing Credit Enhancement was also highlighted in JCHS’ paper. The program provides a partial loan guarantee for the construction of middle-income housing—which is affordable to a household earning up to 100% of AMI, that is built on land acquired from one or more public agencies.

While each of these middle-income housing programs differ as far as funding and requirements are concerned (in addition to various other aspects), they’re also new and graphically diverse, covering a spectrum of market conditions and housing costs.

Delving deeper, per-unit funding for state and local governments is generally different. For example, Massachusetts provides loans for up to $100,000 per affordable unit, Michigan a maximum of $70,000 in grants per affordable unit in projects with at least 12 units, and $80,000 for smaller projects.

Many programs have commonalities, too, however, almost all the programs highlighted in the study use a percent of AMI to determine eligibility for renters rather than job status, career path, or other, even when billed as “workforce housing” programs.

According to JCHS’ blog post, “While some programs fund rehabilitation, adaptive reuse or acquisition and conversion, they largely emphasize new construction.” For example, “the Colorado Middle-Income Housing Authority aims to subsidize the creation of 3,500 units affordable to middle-income renter households, including at least 2,800 units that must be newly built.”

Little research has been done on state and local middle-income housing programs and policies, which is why Harvard’s JCHS paper intends to “close this gap by documenting the rise and features of these programs.”

To read the blog post, click here. For the full study/paper, click here.

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