We support Governor Moore’s housing proposals, and want to make them better

HousingGGWash PolicyBy Dan Reed (Regional Policy Director) February 12, 2024

A duplex in a recently built development in Baltimore. Photo by Dan Reed.

“Building more will help to bring prices down.” Governor Wes Moore didn’t mince words in his State of the State address last week when talking about his ambitious proposal to address Maryland’s 96,000-home shortage. His package of bills–which we’re calling Moore Housing–would address the restrictive zoning and permitting laws in much of the state that make it hard to build homes, especially townhomes or apartments. The proposal would only apply to developments where a large percentage of the homes–as many as 50% in some cases–are subsidized and income-restricted.

This might be the first time a governor has gotten this involved in land use, typically a local government issue, since Parris Glendening’s Smart Growth Act 25 years ago. We want Governor Moore to be successful in getting more homes built and bringing down Maryland’s high housing costs. But doing so may mean reducing or dropping requirements for subsidized homes. That’s why we’re proposing some amendments, and we’re asking for your help to build support for them.

Wes Moore’s Moore Housing, a recap

Moore Housing consists of three bills which address different aspects of our housing crisis: tenant protections, financing, and supply. All three bills will have a public hearing in the House Tuesday, February 20, and in the Senate the following week. We strongly support the Renters’ Rights and Stabilization Act (HB 693/SB 481), which caps the cost of security deposits and makes it more difficult and expensive for landlords to file evictions, and the Housing and Community Development Financing Act (HB 599/SB 483) would create a new state-owned financing source for subsidized, income-restricted affordable housing.

Over the past several weeks, we’ve been most focused on the Housing Expansion and Affordability Act (HB538/SB484). It would require local cities and counties to approve larger developments than their zoning currently allows in areas within one mile of a rail transit station, or on land owned by nonprofits or the state. In areas zoned for apartments or commercial uses, buildings 30% larger would be allowed. In areas zoned for single-family homes, “missing middle” homes like duplexes and townhomes would be allowed. The bill would also streamline the local permitting process, reducing the number of public hearings and preventing cities and counties from blocking new homes due to overcrowded schools.

Artspace, an income-restricted housing development in Silver Spring. Image by the author.

These measures would only apply if 25 to 50 percent of the homes in the development are dedicated affordable housing, meaning they’re set aside for households making less than 60% of the area median income. Depending on where you live in Maryland, that can range from $46,000 to $82,000 for a family of four.

This requirement could make it difficult for the bill to produce many new homes. Affordable housing is expensive to build: you have the same land, materials, and labor costs of any other development, but you can’t charge as much in rent, which in turn makes it harder to get financing. That’s where government subsidies come in, like the federal tax credits that many affordable housing developers rely on.

But that funding is limited, and as a result there are conversations in Maryland and around the country about alternative solutions. One is social housing, or having local governments buy the land, provide financing, or own the project. This year we’re also supporting a bill from Delegate Vaughn Stewart that would help cities and counties do that. Montgomery County has quickly become a national leader in this space; the Laureate, the first of several such developments the county is working on, opened in June 2022. Thirty percent of its 268 units are set aside for households making either 50% or 60% of the area median income, or about $79,000 for a family of four.

Dedicated affordable housing isn’t enough

Dedicated affordable housing and social housing are crucial parts of our housing solution. But they’re not sufficient. We don’t have enough resources to scale either of these up to fill a 96,000-home shortage. Then there are the people who make more than the incomes typically required to qualify for dedicated affordable housing, but still struggle to find homes within their budget.

That’s where the private market comes in. “Market-rate” homes (meaning, they’re not income-restricted or subsidized) aren’t automatically expensive, but we make them expensive because most communities set aside most of their land for single-family homes, or require expensive and lengthy permitting processes. Housing researchers Salim Furth and Emily Hamilton note that new development can in fact be built at a price middle-income Marylanders can afford. In a recent op-ed in the Baltimore Sun. I along with Jonathan Robinson and Ben Shnider called on Governor Moore to consider them as well:

Market-rate, unsubsidized homes — which are the vast majority of homes for sale or rent in Maryland today, and what most Marylanders rely on for shelter — account for a significant part of our housing shortage, and they’re a large part of the solution, as well. The governor and housing secretary would do well to extend their zoning and permitting reforms to all new homes, including market-rate homes.

There are two amendments we at GGWash would like to see in the Housing Affordability and Expansion Act that would address both of these problems: the financial barriers that prevent more dedicated affordable homes from being built, and the zoning and permitting barriers that keep lower-priced market-rate homes from being built.

The changes we’d like to see

Our first amendment is to require a lower percentage of dedicated affordable units in larger buildings. That is, lower than the additional density that the bill requires for providing those units. For example, Montgomery County already requires that 12.5% to 15% of the new homes in a development be set aside for lower-income households, but if a developer sets aside 25% instead, they’re allowed to make their building 35% bigger.

By making the percentage of additional density larger than the income-restricted housing requirement, a developer could use the profits from renting or selling more market-rate units to offset the lower rent or sales price of income-restricted homes. This could mean fewer subsidies are needed to build the project, or perhaps none at all. While the percentage of dedicated affordable homes is lower, we’ll get a lot more of them if the total number of homes built is higher.

Our second recommendation is to eliminate dedicated affordable requirements for missing middle homes. These projects are likely to be small, like a duplex, or a small group of four townhomes. Those homes can be significantly cheaper than a new single-family home, but in areas with high land values, the subsidies needed to make those homes affordable to low-income households still make them financially infeasible.

As an example, Habitat for Humanity recently built a duplex in Takoma Park, intended for two families making 80% of the area median income, or about $95,000 for a family of four. It went through the same permitting and approval process a much larger development would have, which can take months or years and cost tens of thousands of dollars. Habitat estimates that the completed homes are worth about $645,000, compared to $870,000 for a new single-family home in the same location. Both are big numbers, but that’s still a 25% discount, and you can adjust the price up or down depending on Maryland’s different housing markets.

Nonetheless, Habitat still needed $350,000–$175,000 per house–to get the price down to the $470,000 its intended owners could afford. If this project hadn’t required a lengthy approval process, or if Habitat could have built four or six homes on that property instead of two, it’s possible the price of each home would have been low enough to sell those homes with a much smaller subsidy, or none at all.

People want things

Everyone has their own definition of affordable housing, based on their own personal experience looking for a home, their politics, or terms that affordable housing developers actually use. Regardless, many people seem to agree that Maryland needs more of it. Whether in national polls, Maryland polls, or in our Montgomery County poll two years ago, people say it’s too expensive to buy or rent a home, there aren’t enough choices, and they support policies that would create more homes, full stop.

The districts represented by sponsors of Governor Moore's Housing Expansion and Affordability Act. Map by Adriana Vance and Dan Reed. Image by the author.

Likewise, all three of the Moore Housing bills have significant support within the General Assembly, with at least 40 sponsors for each bill on the House side and 8 Senate sponsors. They represent a wide swath of Maryland, including rural, suburban, and urban communities from Hagerstown to Southern Maryland to the Baltimore suburbs.

Despite its strong support, the Housing Expansion and Affordability Act still faces opposition from communities who don’t want the state telling them what to do. There’s a risk that instead of making this bill stronger, Maryland legislators could make it weaker and less effective in increasing housing production.

In our conversations with legislators and the Moore administration, we’ve been told that this is the beginning of a much larger conversation about how to address Maryland’s housing shortage, and they welcome additional ideas. We urge the Governor and the General Assembly to seriously consider proposals that would get Marylanders of all income levels closer to finding homes they can actually afford.

How you can help

If you’d like to support the Governor’s housing bills, especially the Housing Expansion and Affordability Act and our recommendations, here’s what you can do:

If you have a few minutes:

If you have a few more minutes: Sign up to testify, either in person or virtually, or send written testimony. To do that, you can follow our sort of easy guide. These are the dates you need to know:

This post was updated to reflect a new date for the Senate hearing on the Housing Expansion and Affordability Act.