Massachusetts needs more affordable housing as subsidies expire soon, Boston Fed report says

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By Dave Sebastian
BU News Service

BOSTON — There aren’t enough affordable-housing units available in Massachusetts for two low-income households to find a single home, the Federal Reserve Bank of Boston said in a study released April 3.

To keep up with population increase, Massachusetts needs to add more than 4,000 subsidized housing units, or it would risk the plight of workforce outside the state, the Fed said.

The state in 2016 experienced a shortage of 141,291 affordable rental units in extremely low-income renter households, or ELI, which the Department of Housing and Urban Development defines as households with annual incomes less than 30% of the area median income, the American Community Survey found.

“Due to high housing costs, ELI households often have to forgo spending on healthcare, food, childcare, or other necessities,” the Fed report said. “A single financial shock—a job loss or a large medical bill—can cause this group to fall behind on rent, leading to eviction or even homelessness.”

The countdown is on for Massachusetts affordable units, which heavily rely government funding. By 2025, low-income families in 9,110 units across 25 cities and towns could see astronomical rises in rent as subsidies attached to the units expire, according to the report, which was co-written by the New England Public Policy Center. The number could rise to 13,331 units by 2035, the report said.

The Massachusetts private sector, which supplies 7.6% of low-income renter households in 2016, has not been able to provide enough affordable-housing units, the study noted. Units funded by state and federal governments, meanwhile, accounted for about 41% of all low-income households. The federal government in 2016 subsidized three-quarters of ELI renter households in Massachusetts, the report said.

About 28% of all renter units in Massachusetts are of ELI households, the study noted. In Massachusetts, households with less than 50% of the area median income qualify for rental assistance programs that bill 30% of their income toward rent.

By 2035, Massachusetts would require between $843 million and $1.03 billion to preserve units with expiring subsidies and increase subsidized housing, according to report estimates.

Geographic allocation

Affordable-housing units are depleting in major cities such as Boston, Worcester and Springfield, while parts of Central and Western Massachusetts have more market-supplied affordable units, the report noted. One way to more efficiently allocate the state’s resources is to shift rental assistance to communities where rents are low and market-supplied housing is plenty, according to the report.

“Doing so will take advantage of local market conditions that are favorable to rental-assistance subsidies while addressing these areas’ high rates of rent burden,” a condition in which households spend more than a third of household income on rent and utilities, the report said.

In larger cities and areas with little market-supplied affordable units, the Fed suggested more implementation of the federal government’s Low-Income Housing Tax Credit, providing tax breaks for developers with the condition that they make units affordable to households with incomes below 50% or 60% of area median income.

“Tax credit and other supply-oriented subsidies can be targeted more heavily to areas with less affordable housing stock overall,” the report said. “Building geographic considerations into program administration can help achieve this tailoring of resources.”

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