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Housing Perspectives

Research, trends, and perspective from the Harvard Joint Center for Housing Studies

Middle-Income Housing Programs Emerge as Affordability Challenges Climb the Income Ladder

In response to housing affordability challenges rapidly climbing the income scale, state and local governments have adopted policies and programs to explicitly address the housing needs of middle-income renters. In a new working paper, "Subsidizing the Middle: Policies, Tradeoffs, and Costs of Addressing Middle-Income Affordability Challenges," we consider what these programs are intended to do, what the potential benefits are, whom they serve, and the policy tradeoffs that might occur if state and local governments prioritize middle-income affordability challenges.

In our study, we examine eleven 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 (Table 1). For example, 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 percent of area median income (AMI). At the local level, the Philadelphia Workforce Housing Credit Enhancement provides a partial loan guarantee for the construction of middle-income housing, affordable to a household earning up to 100 percent of AMI, built on land acquired from one of several public agencies.

These middle-income housing programs differ tremendously in terms of their funding mechanisms, activities, and requirements, but we highlight ten key themes. For starters, these programs are relatively new, with most of them coming into existence since 2019. The programs are geographically diverse, present in states across the county, and encompass a range of market conditions, housing costs, and political environments, including statewide programs in California, Georgia, and Minnesota.

Several broad commonalities unite these programs. Nearly all use a percent of AMI threshold to determine eligibility, rather than employment status, occupation, or some other criteria, even when they are specifically billed as “workforce housing” programs. While some programs fund rehabilitation, adaptive reuse, or acquisition and conversion, they largely emphasize new construction. For example, the Massachusetts Workforce Housing Initiative funds the construction or adaptive reuse of rental housing affordable to those earning 60-120 percent of AMI, with a preference for new construction projects; 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.

The affordability period for property owners varies but is generally modest. On the high end, the Rhode Island Middle Income Loan Program requires qualifying middle-income housing to be kept affordable for at least thirty years and Massachusetts requires affordability for between fifteen and forty years. In Michigan, homes must be kept affordable for a period of ten years. Meanwhile, the California Statewide Communities Development Authority Workforce Housing Program acquires existing market-rate rental housing, and income- and rent-restricts those units for middle-income households, creating an opportunity for longer-term, if not permanent, affordability.

At the same time, the per-unit funding for state and local governments differs but is generally low.  Massachusetts provides loans for up to $100,000 per affordable unit, while Michigan awards a maximum of $70,000 in grants per affordable unit in projects with at least twelve units, and $80,000 for smaller projects. While a different program in terms of structure, the Georgia Rural Workforce Housing Initiative provided an estimated $24 million in infrastructure grants for local governments across three funding rounds that will enable the construction of just over 1,000 units, at a cost of roughly $23,000 per unit. Through the Moderate Income Housing Program, Kansas provided about $27 million in funding for the development of 992 for-sale or rental units in 2023 alone, at about $27,000 per unit.

Because of their relative recency, minimal research has been done on state and local middle-income housing policies and programs. Our paper helps close this gap by documenting the rise and features of these programs. Their proliferation speaks to the growing unaffordability that is affecting more people and more places than ever before. However, the cost of addressing middle-income rental affordability must be balanced with meeting the long-standing and deep needs that lowest-income renters face.

In forthcoming blogs, we will discuss the findings from our analysis on the characteristics of middle-income renters and the affordability challenges they face.

Table 1: Middle-Income Housing Programs Summary Characteristics

Location Program Name Year Created Renter Eligibility Subsidy Type/Funding Mechanism
Florida Missing Middle Property Tax Exemption 2023 81-120% AMI Property tax exemption
Georgia Rural Workforce Housing Initiative 2023 Up to 100% AMI Grants and loans for infrastructure development
Michigan Missing Middle Housing Program 2022 60-120% AMI Grants
Breckenridge, CO Workforce Housing Five-Year Blueprint 2022 Varies Grants, utility hookups, fee waivers, land donations, others
Colorado Middle-Income Housing Authority 2022 80-120% AMI, or up to 140% AMI in rural resort areas Bond financing
Rhode Island Middle Income Loan Program 2021 80-120% AMI Deferred loans
California CSCDA Workforce Housing Program 2020 80-120% AMI Bond financing
Minnesota Workforce Housing Development Program 2017, 2023 amended NA Deferred loans
Philadelphia, PA Workforce Housing Credit Enhancement 2017 pilot; 2019 expansion Up to 100% AMI Partial loan guarantee
Massachusetts Workforce Housing Initiative 2016 60-120% AMI Loans
Kansas Moderate Income Housing Program 2012 60-150% AMI Grants, loans