A New Report Highlights Issues and Solutions to Maryland’s Affordability Challenges

Earlier this year, the Maryland Office of the Comptroller released its first State of the Economy report, highlighting issues and trends as the “Old Line State” continues to recover from the impacts of the COVID-19 pandemic. The report highlights Maryland’s key strengths, including the nation’s low unemployment rate, high median household income and relatively high educational attainment levels, while zeroing in on key challenges facing the state’s economy. The report also includes a case study on housing affordability in a state where housing costs continue rising each quarter.

The report acknowledges that “housing is typically not the top concern for [Maryland’s] business community and economic development officials.” However, roundtable discussions with diverse economic actors across the state found housing availability a top concern no matter which part of the economy was represented.

“This was significant to us because businesses require a sufficient supply of affordable and available housing across all income levels to foster a strong candidate pool for available jobs,” Robyne McCullough, a spokesperson for the Comptroller’s Office says. “Members of the workforce need available and affordable housing to access and sustain employment and earn wages to cover the cost of living, which includes the cost of housing,” McCullough adds.

According to the case study, one of the chief drivers of the state’s affordability issues seems to be an increasing shrinkage of housing availability. Citing data from the American Community Survey and Maryland Association of Realtors, the report found this to be a blanket issue across the state, as housing inventory dropped a whopping 57 percent statewide, and between 40 to 75 percent per county between 2019 and 2022.

Maryland’s History of Under-Construction
Though housing shortages certainly exist nationwide, under-construction is acute in Maryland, which was ranked 42nd in the country by number of new building permits issued, according to data that the case study cites from the Census Bureau’s Building Permits Survey. The relative lack of construction has gripped the state for at least two decades, with the state’s housing stock shrinking consistently since the late 1990s, the report says.

Many issues have conspired to cause this shortage, says Mary Claire Davis, vice president of Real Estate Development for Affordable Homes & Communities (AHC) and director of its Greater Baltimore office (she is also a Board member of the Maryland Affordable Housing Coalition, an association representing Maryland’s affordable housing developers and co-chairs its Legislative Committee, which oversees advocacy work). It’s become “difficult and time-consuming” to construct homes across the state, with “zoning issues, entitlement issues, NIMBYism (Not In My Backyard)” and other factors causing diminished construction, even before the pandemic.

Across the state, Maryland’s diminished housing stock has had acute effects due to the state’s unique cost implications, Davis says. Specifically, she points to the influence of the Washington, DC metro area, which is the sixth highest-income metro in the country, according to the U.S. Department of Commerce. As remote work has trended upwards, “wealth migration” has spread deeper into formerly rural counties, causing a rapid growth in housing costs. “Look at a place like Frederick County, where there’s been a huge amount of growth. It started as an outer suburb that was more affordable… and has now become a job center in and of itself. It’s a county with real positive economic growth, and their housing affordability has been compounded as a result.”

“Even in places like the Eastern Shore that have traditionally been more affordable, housing has become almost out of reach for locals, as hybrid work and retirement bring more and more folks to areas that have been more rural, less dense,” says Davis.

Response to affordability challenges has varied statewide, largely due to the flexible resources afforded to the more populous segments of the state. “One of the key components to making affordable housing work is the availability of soft subsidy funding,” says Davis. “You see that impact a lot more on your smaller, less populous counties because they don’t have the resources to support affordable housing development.” This means that places with a larger population—such as the DC suburbs, Montgomery and Prince George’s Counties, as well as Baltimore City and its surrounding counties—“have had the tax revenue to support housing initiatives, plus they’ve made it a policy priority and put a lot of tools in place.” However, “in Western Maryland and the Eastern Shore, they just don’t have the same volume of resources to support affordable housing.”

Additionally, this extreme geographic and economic diversity within Maryland’s relatively small borders means that responses to low housing stock and high housing costs must be tailored to localities across the state. Scott Gottbreht, assistant secretary for policy, strategy and research at the Maryland Department of Housing and Community Development (MDHCD) points out that each region of the state presents its challenges to housing construction and thus long-term answers to affordability problems. “For the less-populous eastern and western regions of the state,” Gottbreht says, “water and sewer infrastructure presents a barrier to additional housing supply growth. Similarly, in various parts of the state, there is often a desire to preserve Maryland’s agricultural capacities and ecological spaces, meaning that strategies to encourage denser housing development are required as opposed to perpetuating housing sprawl.”

In rural parts of the state, the housing crunch has acutely affected the workforce. As the Comptroller’s report notes, in the Eastern Shore, “front-line workers, including teachers, nurses, restaurant and hospitality staff” often are the first to “get priced out of town or city centers.”

Localities may not have the resources to combat rising housing costs to the degree that the state government might, but Davis says those individual counties can look towards creative solutions to encourage broader housing options. “Could a locality have a faster permitting process? Could there be a density bonus for creating affordable housing? The state has started incentivizing that a bit, and in the last legislative session, the governor pushed forward some measures to encourage localities to do that.”

Davis highlights Prince George’s County’s Right of First Refusal (ROFR) program as a successful and creative local initiative that has boosted longer-term affordable housing availability. The ROFR program allows the county to prioritize land sales to affordable housing developers by allowing them to purchase contracts that would otherwise go to market-rate developers, creating preservation in areas that are increasing in value and transitioning away from naturally occurring affordable housing. For example, AHC recently opened Haven Largo, a 245-unit, partially rent-restricted community, which AHC purchased in 2022 in partnership with Insight Property Group and with the help of the ROFR program.

Movement Towards a Resilient Future
Some optimism renewed energy and interest surrounding affordability have injected new life and momentum into solutions in Maryland. “One of the things that’s changed over the last couple of years is that we are talking about housing affordability a lot more than we used to,” Davis says. The question of housing affordability “is now infused into the general conversation more than it ever has been.”

One significant source of momentum towards a more affordable future for Maryland is a broad package of housing legislation advocated for by MDHCD and signed into law by current Governor Wes Moore, which is championed by the Moore-Miller administration as, “The most significant housing legislation enacted in the state in decades.” Passed this year, the legislative package contains three key components: regulatory incentives that encourage transit-oriented development, as well as development on formerly public land or nonprofit development; significant protections for renters focused on reducing eviction and displacement, and the creation of a community investment corporation to apply for New Market Tax Credits to incentivize the development of affordable housing.

Gottbreht credits a “transparent, cooperative approach” for the energy behind the legislation’s passing, which brings together a “broad coalition of advocates, including the Maryland Association of Counties and the Maryland Municipal League.”

In addition to Governor Moore’s legislative package, a recently announced strategic development plan from Maryland’s Department of Transportation focuses on transit-rich areas as a target for the construction of higher-density affordable communities.

Though new construction and preservation is a priority as statewide advocates work to increase access to affordable housing options, Davis says that she is encouraged by the federal and state government’s increased focus on energy efficiency. “That’s helping everywhere, but particularly in affordable housing.” This focus, alongside relatively new federal programs. like EPA’s Greenhouse Gas Reduction Fund (GGRF) and HUD’s Green and Resilient Retrofit Program (GRRP), has created a new pathway for increased affordability in Maryland. “If we can reduce utility burdens for both residents and owners,” Davis says, “that can help affordability as well as the climate.”