Cuts to rental housing budget hurt essential workers and the economy

Over the past month, forecasters have painted a bleak picture for Maryland state revenues. Federal support for state budgets during the COVID crisis is gone, and local economic growth is not sufficient to make up the difference.

We are encouraged that Gov. Wes Moore has viewed these fiscal challenges as a call to “build a dynamic economy” that can support the state’s ambitions. He described tactical investments paired with a reexamination of budget priorities during the 2023 General Assembly. Housing Maryland’s workforce must be a top priority to ensure we meet the challenge ahead.

The Maryland Affordable Housing Coalition represents affordable housing developers that build housing for the tens of thousands of Marylanders who have seen the cost of housing outpace their income. These Marylanders have been called “essential workers” and hometown heroes. They work in our schools and hospitals. They police our communities and serve our fire departments. The families who live in affordable housing make our economy work.

Maryland needs the Rental Housing Works program to ensure our workforce can afford to live here. This program is operated by the Department of Housing and Community Development (DHCD) and provides critical gap financing loans for the creation and preservation of subsidized affordable housing.

Since its inception, our data show that the Rental Housing Works program has helped fund 129 multi-family developments comprising 13,800 residential units. The program has been a boon to economic development in Maryland, providing an $11 to $1 return on state funding. State investment of $280 million over the past 11 years has leveraged $3 billion in other investment. Notably, this return is calculated without incorporating the economic benefit of providing affordable housing for the employees of businesses across the state.

Despite all of this, last year Maryland reduced state funding for rental housing programs from $104 million in FY2023 to $61 million for FY2024. At present, DHCD can fund only one out of every five affordable housing projects in the Rental Housing Works pipeline.

Combined with rising interest rates and construction costs that dramatically increased the cost of development, the failure to increase the Rental Housing Works budget to keep up with these pressures on housing construction has further exacerbated our state’s affordable housing crisis.

At present, there are 70 projects seeking funding from the Rental Housing Works program. These projects need a combined $198 million in gap financing. Even if the department were to remove the per-project cap, there would only enough funding in FY2023 to close 15 projects, sidelining over 57 deals waiting to close. This pipeline represents over 7,000 units of vitally needed housing across the state and nearly 20,000 jobs. At the current pace of funding, it would take four years to start all the projects already in the pipeline and the list keeps growing.

The inability to finance housing today is holding back Maryland’s ability to grow our economy. If essential workers can’t afford housing, Maryland businesses will be unable to attract and retain the employees needed to fuel the state’s growth.

In the meantime, predevelopment and carrying costs make waiting for funding an impractical option for most developers who will look to invest in other states that have made housing a priority.