Subsidizing the Middle: Policies, Tradeoffs, and Costs of Addressing Middle-Income Affordability Challenges

Housing affordability challenges have crept increasingly up the income scale and have left a record-high share of middle-income renter households with cost burdens. In response, a growing number of states and localities have adopted policies and programs to address middle-income housing needs. 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, but they face backlash from housing advocates who fear these subsidies will redirect resources away from lower-income households with the greatest need. In this research, 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 we prioritize addressing middle-income rental affordability. We examine eleven state and local programs addressing middle-income housing needs, finding that these programs have become increasingly prevalent in recent years, that they exist in geographically and politically diverse states, and that most focus on expanding the supply of middle-income housing. Many of these programs intend to address the housing challenges of the “workforce,” though nearly all require middle-income rental housing to be kept affordable to households based on the area median income, rather than based on some occupation or employment requirement. However, we find that these programs, in operationalizing one common definition of middle-income, do not serve most working renters with affordability challenges, who are overwhelmingly lower-income. Nationally, about one-third of middle-income renters were cost-burdened, though the rate with burdens is especially high in more expensive states. Still, cost burdens are much higher for lower-income renters everywhere. Middle-income renters are also disproportionately white, which raises concerns about reinforcing racial inequities. We conclude by recommending that middle-income programs be designed in a way that does not divert resources away from the lowest-income households, that they operate in places where the market cannot adequately serve middle-income households, and that they have corollary benefits to lower-income households.