Middle-income housing programs increase nationwide

A record amount of middle-income renter households feel cost-burdened and increasingly state and local governments are attempting to remedy that with targeted housing programs, according to a study by Harvard University's Joint Center for Housing Studies. 

Households of all income levels have seen more cost burdens over recent years. The total number of cost-burdened rental households hit a peak of 22.4 million in 2022, an increase of 2 million households since the start of the pandemic, according to the study. 

However, middle-income renters have experienced the fastest increases in housing expenses over the past two decades, which accelerated during the pandemic. Nationally, one-third of middle-income renters are cost-burdened, the study said. 

These programs have become increasingly prevalent in recent years and can be found in a range of market conditions and politically diverse locations, the study said. Their primary goal is to address housing challenges of the "workforce," though eligibility is determined by area median income, rather than employment requirements, researchers found. 

Middle-income programs have not yet been successfully implemented at the federal level. But a growing number of states that had been historically affordable, such as Colorado and Michigan, now have policies that provide subsidies for middle-income housing, as only 1% of American counties are considered affordable. 

"These programs hold some promise for expanding the supply of affordable housing, especially in places with severe affordability challenges or in difficult-to-develop areas," said the Harvard researchers in their study. 

However, they also face backlash from advocates who fear these subsidies will redirect much-needed resources away from lower-income households, the study said. 

Middle-income housing programs vary in terms of their funding mechanisms, affordability periods and eligibility requirements. Most of them are also relatively new, having come into existence after the pandemic. 

Most of the available programs emphasize new construction. The Colorado Middle-Income Housing Authority plans to make 3,500 units affordable to middle-income renter households, including at least 2,800 units that must be newly built.

The "affordability period" for property owners participating in these programs run the gamut: Rhode Island's Middle Income Loan Program will enforce that qualifying housing is kept affordable for at least 30 years, and Massachusetts between 15 and 40 years. On the low end, Florida's qualifying homes need only be kept affordable for three years. 

Some programs are outliers in their strategies, like California's Statewide Communities Development Authority Workforce Housing Program. It acquires existing market-rate rental housing and income- and rent-restricts them for eligible households, allowing longer-term, if not permanent, affordability. 

While programs of this type have not yet been successful at the federal level, a middle-income housing tax credit has become a perennial policy proposal. 

According to the Harvard study, it would function like the Low-Income Housing Tax Credit program, allocating funding to states on a per capita basis to then award to developers for the construction, redevelopment, or acquisition of rent-restricted apartments for middle-income renters. 

Legislation for the tax credit was first introduced in 2016, with the most recent development, the Workforce Housing Tax Credit Act, sent to committee at the end of 2023.