Affordable Housing Solutions Easy — and Complex

The overall effort to solve the national and local housing crisis is paradoxically as straightforward as a game of checkers, but as complex and baffling as a Rubik's Cube puzzle.

 

On a basic level, the issue is clear. It boils down to two fundamental problems: There is a shortage of housing in all categories and the costs of buying or renting a home have escalated beyond the incomes of many people.

 

But because there is no single cause or "silver bullet" solution, the array of initiatives to make housing more plentiful and affordable can seem like a baffling maze of agencies, priorities, policies, regulations, and complex mathematical formulas.

 

The issue can also cause controversies and misunderstandings.

 

And for those who are seeking to buy or rent a home, the shortage of affordable housing can be personally frustrating, confusing, and even frightening. For some, it can lead to homelessness.

 

Nevertheless, while individual affordable-housing policies and programs differ in specifics, most rely on a core of basic strategies to deal with the underlying causes.

 

Taking a step back to look at the broader context can help to better understand the details.

 

The current crisis is the cumulative result of economic, social and political trends that began in the 1970s and have intensified over time, especially since the COVID-19 pandemic of 2020.

 

Housing prices and rents have risen faster than average incomes, which has led to a widening gap between housing that is "market rate" and homes that are affordable to many working people.

 

As a result, the phrase "affordable housing" has become a formal term and legal designation in housing policies and initiatives. A related term is "workforce housing."

 

This is much broader than the ongoing challenge of providing public housing for people with low incomes, the disabled, seniors, the homeless and other vulnerable populations.

 

The lack of affordable housing also impacts working people who earn moderate and middle-class incomes.

 

"We defiantly need more housing overall, but the type and cost of housing is also important," said Brad Gordon, executive director of Upside413, a non-profit housing services agency (formerly the formerly the Berkshire County Regional Housing Authority). "Creating more market-rate and upscale housing units can mitigate the problem to some extent. However, that alone won't address the larger discrepancy between incomes and housing costs."

 

Even in today's polarized political climate, there is a widespread consensus from the political left to the conservative right on the basic need to increase the supply of housing and make it more affordable.

 

Politicians as politically divergent as President Donald Trump and New York Mayor Zohran Mamdani have endorsed policies to increase the supply and affordability of housing by streamlining the red tape and reducing the cost required to build, buy and rent homes.

 

In a rare instance of bipartisanship, Congress is currently negotiating and is expected to pass the 21st Century ROAD to Housing Act, an ambitious bill to increase the affordability of housing.

 

On a statewide level, Massachusetts — which is one of the most expensive states for housing in the nation — has also made this a high priority.

 

In 2024, Gov. Maura Healey signed the Affordable Homes Act. This is described as the most ambitious housing legislation in Massachusetts history. Its stated goal is to counter rising housing costs caused by high demand and limited supply. It authorized $5.16 billion in spending and includes 50 policy initiatives to support the production,

preservation and rehabilitation of homes statewide.

 

"We went big with the Affordable Homes Act," said Lt. Gov. Kim Driscoll at the time of the signing. "It received incredible support from members of the Legislature, advocates, employers, business leaders and healthcare professionals. Together we understand the importance of investing in housing in order to remain a competitive state."

 

To put the situation in the Berkshires into perspective, overall regional median (mid-point) home prices rose from $196,250 in early 2015 to $356,000 today, according to figures from the Berkshire County Board of Realtors. This is exacerbated when other expenses such as property taxes, mortgage terms, interest rates and insurance are

factored in.

 

Rents have also escalated. According to the U.S. Department of Housing and Urban Development (HUD), in 2015 "fair-market" rents in Berkshire County ranged from $675 for a studio to $1059 for a three-bedroom apartment. By 2025, that had risen to $1,148 for a studio to $2028 for a three bedroom. (HUD calculates fair market rents

as the 40th percentile of gross rents for standard-quality units in a locality.)

 

A frequently-used benchmark for affordability is based on the guidelines of HUD, which defines "affordable housing" as a home in which occupants are paying no more than 30 percent of their gross household income for basic rent or ownership, and utilities. Anything above 30 percent is defined as "housing-cost burdened."

 

Today, many people spend significantly more than that, sometimes as high as 50 percent or more of their income. A study by the University of Massachusetts' Donahue Institute estimated that 54 percent of renters in Berkshire County are cost-burdened.

 

"For people with modest incomes, the combined costs of housing and basic transportation leaves very little money for food, health care and other necessary expenses," said Gordon.

 

This can also lead to extreme situations for working families, noted Carolyn Valli, CEO of Central Berkshire Habitat for Humanity, a non-profit organization that builds and sells affordable income-based homes.

 

"For example, one working couple had a household income of $1,600 a month and could not find anything available they could afford," she said. "In desperation they had to take an apartment with rent that was $1,520. There are too many hard-working people in that position. They are forced to move into something they can't afford and have to take extra jobs and do whatever they can, just to avoid becoming homeless."

 

Initiatives to alleviate this crisis address the many factors have driven up the cost of housing over time, despite short-term fluctuations and boom-and-bust cycles.

 

On a basic level, it has become increasingly expensive to develop and build housing because of continually rising prices of land, materials, services, and other costs.

 

Adding to this are the expense and long permitting process necessary to meet the stringent requirements of building codes, zoning and other regulations and legal mandates.

 

This has made it less financially feasible for private developers and property owners to build and maintain housing for buyers and renters with low, moderate or middle-range incomes. Much of the construction and development activity in recent decades has been oriented to market-rate and higher-end properties.

 

Other economic and social factors intensified this. Housing has always been an industry, and homes have traditionally been a "nest egg" investment for homeowners.

 

However, since the 1980s, housing as a profit-making commodity has often become a higher priority than its primary role as a residence.

 

This has led to gentrification as an increasing number of investors and corporations have bought affordable properties and substantially raised rents or flipped houses at higher prices. This has intensified in recent years, as large private-equity investment firms have been buying up houses, apartments and mobile-home parks locally and nationwide.

 

Strategies to make housing more affordable are varied, but they fall into two basic categories. 

 

One goal is regulatory reform, with a mix of carrots and sticks. This includes easing regulations and other legal requirements to reduce the difficulty and cost of building or renovating housing. It also includes mandates that require a designated amount of affordable housing units within projects. (That will be covered in a subsequent article in this series).

 

The other strategy is to provide public funding and other support to supplement and create alternative options to the traditional dynamics of supply-and-demand in the private housing market.

 

Some assistance is allocated directly to tenants and homebuyers through vouchers and lower cost financing.

Other financial support is provided to developers and other housing providers. These are intended as incentives to create affordable housing, and to offset the high cost of construction and maintenance.

 

This includes special financing packages, grants, tax credits, and other resources, such as donation of sites. In exchange, the providers are required to include a specific number of units that are designated as affordable for specific incomes.

 

Public support includes several basic sources. In addition to government programs and subsidies, it include affordability initiatives from the housing industry, banks and other financial institutions.

 

Philanthropy and the non-profit sector also have an important role through national, regional and local community-based foundations and organizations. Specific programs, projects and policies use individual guidelines to determine income eligibility for participants, and designation of housing units as affordable.

 

Often it is based on the Area Median Income (AMI) as calculated by HUD and the Census. The AMI is the mid-point of incomes in a locality. An estimated 50 percent of the population earn more than the AMI and 50 percent earn less

Some affordable-housing initiatives and projects are open to people with incomes at 100 percent of the AMI or somewhat above. But most are earmarked for incomes below it, such as 80 percent, 50 percent, or 40 percent. 

 

There is also a category of "deep affordability " for those with incomes of 30 percent or less of the AMI. Berkshire County is divided by HUD into two basic AMI regions. 

The Pittsfield Metro region is a separate section in the center of the county that extends south from Lanesborough and Adams to Stockbridge and east to Hinsdale. It has an AMI of $109,400. A separate Berkshire County region includes communities surrounding this, from North to South County. That has an AMI of $112,900.

 

Current affordable-housing initiatives also reflect a fundamental shift in national housing policy since the 1970s.

Government has long had a key role in housing. It funds and builds public housing projects managed by local housing authorities for the low-income, the disabled, seniors and other specific populations.

 

It also participates in financing housing through agencies like the Federal Housing Authority and quasi-public bodies like MassHousing (The Massachusetts Housing Finance Agency), an independent, financially self-sustaining agency created by the state Legislature in 1966. Among other roles, MassHousing provides financing to low- and moderate-income homebuyers and homeowners.

 

There are also government programs such as Residential Assistance for Families in Transition (RAFT) that provide emergency funding to pay back-rent or assist with moving costs, to help people avoid — or transition out of — homelessness.

 

Municipal governments also have programs to support affordable housing, through regulations and other vehicles. For example, the City of Pittsfield established an Affordable Housing Trust (AHT) in 2022 to address housing challenges. 

 

These roles of government continue to be important. However, in 1973, the emphasis began to change. The Nixon administration imposed a temporary moratorium on the construction of federal public housing projects, contending they were detrimental to tenants and communities. Subsequently, many housing projects were demolished.

 

This led to an increasing reliance on the private sector to provide low-cost housing. This is sometimes referred to as "private affordable housing." For example, in the 1980s, Congress created vouchers to low-income tenants to

pay for rent in privately-owned housing, as an alternative to public housing projects. These include Federal Section 8 / Housing Choice Vouchers (HCV) and the Massachusetts Rental Voucher Program (MRVP). Typically an income-eligible tenant pays up to 30 percent of their income towards the monthly rent, and the voucher covers the remaining balance.

 

Support to developers and builders of housing are also known as "public-private partnerships." One frequently used form of subsidy are tax credits and deferrals. An example is the Low-Income Housing Tax Credit (LIHTC) which was created by Congress in 1986. 

 

The federal government issues tax credits to state governments, which award them to developers and property owners. The recipients are required to include a certain number of units designated as affordable with specific rent levels.

 

"These tax credits are a form of financing for residential developments," explained Matt Kropke, director of real estate development at Hearthway (formerly Berkshire Housing Development Corp.) Hearthway is a nonprofit organization that

creates and manages affordable housing. It has frequently partnered with private development firms.

 

"The sponsors of projects that receive them can raise capital by selling them to investors, financial institutions or other entities that use them to offset their own tax liabilities," he said.

 

Another form of incentive used by municipalities is Tax Increment Financing (TIF). With a TIF, the increased value and property tax that results from development or redevelopment of a site is deferred and phased in over a period of years. This provides additional capital that would otherwise be paid in taxes. The overall concept can be used for housing, as well as projects that meet other goals such as urban revitalization and job creation.

 

Projects that utilize these and other methods of support can range in size from smaller projects for specific eligible populations to larger mixed-income developments. They include new construction, renovation of existing housing, and conversion and redevelopment of structures such as schools, churches or mills for housing.

 

Often, affordable projects and programs draw on a combination of sources of support. Developers will combine private capital investments and financing with subsidies or other programs.

 

Although such projects are not yet on a scale to solve the housing crisis, examples of these approaches and innovative variations have produced numerous affordable units already.

 

The next installment will look at examples in the Berkshires.