Introduction
Housing is generally considered to be the greatest problem facing Massachusetts. The lack of available housing has led to extreme rent increases and unaffordable home prices, resulting in housing cost burdens that have worsened steadily over time and have disproportionately impacted communities of color. Additionally, insufficient investment in public and income-restricted housing has left low and middle-income residents with fewer options, contributing to the displacement and homelessness crises.
In August 2024, Governor Healey signed the Affordable Homes Act, a five-year bond bill that aims to address the housing crisis by authorizing $5.16 billion in borrowing, more than any previous housing bond bill. How much of that will actually be invested, and how do those investments compare to prior years or the demonstrated level of need?
What is the Affordable Homes Act (AHA)?
States have two basic types of budgets:
- The operating budget, which funds ongoing government activities for a single year, and is funded primarily by recurring sources of revenue such as taxes and fees;
- The capital budget, which may be for a longer period and used for longer-term investments, such as buildings and roads, and is financed primarily by borrowing, in the form of issuing bonds.
The AHA, signed into law in August 2024, is a bond bill that authorizes borrowing for our capital budget for housing. It gives the administration permission to issue bonds in the future as a way to borrow money, which is then paid back to bondholders over many years. Housing bond bills are generally passed every 5 years, and contain a set of borrowing authorizations, or “bond authorizations,” for different purposes. The capital budget funds many important programs that include affordable housing development, public housing maintenance, incentives for building more housing, and sustainability upgrades. The previous housing bond bill was passed in 2018.
How much will be invested as a result of the AHA?
Bond bills are not actual state funded investments; they are a list of items for which the state is authorized to borrow money. Actual capital investment is planned in the Governor’s capital budget and Capital Investment Plan. There are multiple factors that limit the actual investment from any bond bill, regardless of how big the bill is. Legally, the Commonwealth is limited in its ability to issue new debt, intended to prevent it from taking on excessive debt that it would struggle to pay back.
As a result, actual investments are typically lower than what is authorized in a bond bill, and tend to not increase dramatically from one year to the next. For example, the sum of housing capital budgets for Fiscal Years 2019-2024 was approximately 79.1 percent of what was authorized in the 2018 housing bond bill.1 Because the Affordable Homes Act is so much larger than the 2018 housing bond bill, actual investment will likely be a smaller percentage of the amount authorized. An expansive bond bill such as the Affordable Homes Act may give the administration more options to choose from when making capital investments in housing, but overall limits on borrowing remain in place.
The AHA authorizes approximately $5.16 billion in borrowing. Bond authorizations typically have a term of five years, unless the legislature extends them. The Governor’s Capital Investment Plan for the next five years (Fiscal Years 2025-2029), which projects actual investment, anticipates approximately $2.0 billion2 in spending for housing, or approximately 38.7 percent of the amount authorized in the AHA, over the next five years.
It is important to note that the five-year Capital Investment Plan is generally updated each year, and in future years the Governor could increase the housing capital budget beyond what is outlined in the investment plan that was released in June 2024. However, as noted above, capital spending is still constrained by the limit on how much debt the Commonwealth can carry. Additionally, other important priorities such as transportation and economic development are also funded with capital spending, further limiting how much the housing capital budget can realistically increase.
How do AHA investments compare to prior bond bills?
The AHA’s $5.16 billion in authorized borrowing is more than twice that of the previous bond bill passed in 2018, which authorized $1.80 billion in borrowing (about $2.24 billion in 2024 dollars). However, comparing the capital budgets associated with these bills more closely indicates actual changes in planned investment.
To make this comparison, this report analyzes capital budgets for the years financed by the 2018 housing bond bill (Fiscal Years 2019-2024) and the state’s Capital Investment Plan for the next five years (Fiscal Years 2025-2029), which projects capital budgets for future years.3 To make direct comparisons of total investment for multi-year time periods, this report also compares total investment for the previous five years (Fiscal Years 2020-2024) with planned capital budgets for the next five years.4
The increase in planned investment is significantly smaller than the increase in authorized borrowing. Authorized borrowing in the AHA is approximately 130.0 percent greater than the 2018 housing bond bill, adjusting for inflation, whereas actual planned capital investment is 28.7 percent greater for Fiscal Years 2025-2029 compared to the previous five years.
Inflation rates for FY 2026-2029 are based on inflation forecasts from the Congressional Budget Office.
Adjusted to 2024 dollars, the planned housing capital spending for Fiscal Years 2019-2024 averaged about $295.9 million per year. The Governor’s 5-year Capital Investment Plan for Fiscal Years 2025-2029 plans for about $380.9 million per year in 2024 dollars. This represents an increase of about $85.0 million per year in state capital spending toward housing compared to the years financed by the 2018 housing bond bill.5 Looking just at the most immediate years and adjusting for inflation, planned capital spending for Fiscal Year 2025 is approximately 25.6 percent higher than in Fiscal Year 2024. Due to inflation, the value of planned capital spending also decreases over time compared to 2024.
How do AHA investments compare to demonstrated levels of need?
It is common to evaluate budgets by comparing them to prior years, but it is equally important to measure them against how much investment is needed. While comparisons to prior years can be helpful in measuring progress, the level of need puts state investments in perspective toward an overall goal. Additionally, since the housing affordability crisis most acutely impacts communities of color, an equitable approach to measuring need must also pay specific attention to disparities across race, which is obscured in race-neutral statistics.
The scale of Massachusetts’s housing crisis
Massachusetts faces an urgent housing crisis that has worsened over time, and has resulted in high levels of displacement, homelessness, and housing cost burdens. A variety of metrics, such as rent burdens, waiting lists, and repair backlogs make it clear that housing needs have escalated at a scale that exceeds public investment.
Rent Burden
Housing affordability is widely considered to be one of the most pressing issues facing the state. Affordability, or lack thereof, is often measured in terms of rent burden, which is the amount that people spend on rent compared to their income. A renter is considered rent-burdened if they spend more than 30 percent of their income on rent.
More than half of renter households in Massachusetts are rent-burdened, and this percentage has increased over the past several years. In 2018, when the last housing bond bill was passed, the United States Census Bureau estimated that approximately 49.8 percent of renter households in Massachusetts spent more than 30 percent of their income on rent. By 2023, this estimate had risen to 53.0 percent.6 The housing affordability crisis is particularly acute for renter households making under $100,000 per year: 66.3 percent of these households are rent-burdened according to 2023 Census Bureau estimates.7
Additionally, rent burden disproportionately impacts communities of color. Black and Latino residents are significantly more likely to be renters, and are more likely to be rent burdened than white residents. According to 2021 Census Bureau estimates (the most recent year for which estimates by race are available), 53.3% of Black residents were rent-burdened and 54.5% of Latino residents were rent-burdened, compared to 44.6% of white residents.
Waiting Lists for Public Housing and Rental Subsidies
Waiting lists for public housing and rental vouchers are another indicator of need. Massachusetts has a combination of state-run and federally-run public housing, as well as both state and federal rental voucher programs.8 The United States Department of Housing and Urban Development (HUD) regularly estimates the average amount of time spent on a waiting list for public housing and for a rental voucher. In Massachusetts, the wait has gotten longer for both. The average time spent waiting for a public housing unit has nearly doubled, increasing from approximately 18.9 months in 2012 to 37.0 months in 2023. The average time spent waiting for a rental voucher has increased from approximately 25.7 months in 2012 to 45.0 months in 2023. Massachusetts residents are now waiting nearly 18 months longer for stable housing.
Repair Backlogs in State-Run Public Housing
State-run public housing is funded primarily through the state budget, and the Commonwealth regularly estimates how much investment is needed to bring our state’s public housing into good repair. The investments in the AHA can be compared to the size of the repair backlogs that they are meant to address.
The Commonwealth currently faces a multi-billion dollar backlog in public housing maintenance that has worsened over multiple decades. In 2023, the Executive Office of Housing and Livable Communities (EOHLC) estimated a backlog of at least $4.25 billion in repairs. This is a significant increase in the backlog compared to 2001, which was estimated in a study by the Citizens’ Housing and Planning Association (CHAPA), in collaboration with the Commonwealth’s Department of Housing and Community Development, to be $1.5 billion ($2.65 billion in 2024 dollars).9 The Boston Globe has reported that a lack of investment in state public housing has forced hundreds of residents to live in substandard conditions10, while a March 2024 ProPublica investigation found that hundreds of units are vacant because they need major renovation.11 In 2023, the state began an initiative to reduce these vacancies.12
A Closer Look at Public Housing
Public housing is a particularly important area of state spending because it primarily serves low and middle-income residents, and is the largest single category of bond authorizations in the Affordable Homes Act. In 2018, the previous bond bill authorized a total of $650 million ($810.6 million in 2024 dollars) toward public housing between the public housing general fund, and a mixed-income demonstration program run by local housing authorities.13 The AHA authorizes nearly triple this amount, a total of $2.20 billion in borrowing between the public housing general fund and the mixed-income demonstration program. However, due to the constraints of the debt limit, as shown in the state’s Capital Investment Plan, the actual increase in planned spending on public housing will be much smaller.
Inflation rates for FY 2026-2029 are based on inflation forecasts from the Congressional Budget Office.
The chart above compares total planned capital spending on public housing for the previous five years (Fiscal Years 2020-2024) to planned spending for the next five years (Fiscal Years 2025-2029). For Fiscal Years 2020-2024, the Commonwealth budgeted a total of approximately $638.8 million in capital spending for public housing in 2024 dollars. For Fiscal Years 2025-2029, the Commonwealth has budgeted a total of approximately $787.4 million after adjusting for future inflation. This represents an increase of approximately 23.3 percent, or $29.7 million per year, in planned investment compared to the previous five years. These appropriations could increase in future years, but they will be constrained by debt limits and the need to issue bonds for other priorities as well.
While the Commonwealth has increased its capital investment plan for public housing compared to prior years, this planned spending still falls short of the $4.25 billion needed to bring state-run public housing into good repair. For Fiscal Years 2025-2029, total planned investment represents approximately 18.5 percent of the state-estimated repair backlog. Additionally, as our public housing stock continues to age, new maintenance and repair needs will arise. This will add to the total amount of repairs needed, as it did between 2001 and 2023, when the total repair backlog grew by more than $1.6 billion in inflation-adjusted dollars. Some of the AHA’s public housing investment will also go to areas other than maintenance and repair.
The public housing repair backlog took decades to accumulate, and closing it will require substantial and sustained increases in investment. Given this, it is not realistic to expect the entire backlog to be closed within a few years. However, the growth of the repair backlog since 2001 illustrates the degree to which prior budgets have fallen short, and raises questions about whether the planned additional investment of $29.7 million per year in public housing will be enough to reverse or halt this trend. Additionally, because of the limits on state borrowing and other competing priorities, there are significant constraints on the Commonwealth’s ability to increase capital spending in this area. Additional investment in public housing is still needed.
Future Policy Implications
The Affordable Homes Act represents a meaningful increase in housing investment, but this increase is more modest than the size of the bill might suggest. More importantly, the level of unmet need remains high in key areas such as public housing maintenance and the creation and preservation of income-restricted affordable housing. Future capital budgets may be larger, and additional funding sources (such as federal funding or dedicated state revenue) could be added in future years without exceeding debt limits. Even so, bonding by itself cannot meet the full need for state investment in these areas. Because of the overall limits on borrowing, an ongoing revenue source for affordable housing continues to be an urgent need.
A revenue source such as a real estate transfer fee would not be subject to debt limits, and would allow communities to access a near-immediate source of funds that they can use to build and preserve affordable housing. In 2022, the City of Boston estimated that based on 2021 home sales, a 2 percent transfer fee on transactions over $2 million would have raised nearly $100 million that year.14 This increase in revenue for Boston alone would be larger than the $85.0 million statewide increase in annual capital spending in the Fiscal Years 2025-2029 Capital Investment Plan.
In addition to increased investment, our housing affordability crisis calls for a range of additional policy interventions. As noted above, the AHA includes some important steps in this direction: It establishes a foreclosure mediation pilot program and a fair housing office, and makes it easier to build accessory dwelling units (ADUs) across the state. Additional interventions are still needed, and should be a focus in future legislative sessions. These include protections from eviction and extreme rent increases, the right to legal representation in eviction proceedings, emergency rental assistance, preserving existing affordable housing, and dismantling barriers to affordable housing construction in local zoning codes.
Endnotes
1 The 2018 housing bond bill authorized $1.80 billion, or approximately $2.24 billion in 2024 dollars. The capital budgets associated with this bill (Fiscal Years 2019-2024) appropriated a total of $1.54 billion, or $1.78 billion in 2024 dollars. Additionally, the 2018 housing bond bill financed six years of investment instead of five.
2 Because most of these investments will be made after 2024, their value in 2024 dollars is slightly lower after accounting for inflation. Based on current inflation forecasts by the Congressional Budget Office for these future years, the Governor’s Capital Investment Plan is equivalent to approximately $1.91 billion in 2024 dollars. With this additional inflation adjustment, the projected value of investment from the AHA would be 36.9 percent of the $5.16 billion authorization.
3 For past years and this year, the capital budget for each year is the most accurate estimate of investment because five-year Capital Investment Plans can overlap and change. For years in the future, the most recent Capital Investment Plan is the most accurate estimate of planned investment.
4 The 2018 housing bond bill also financed the capital budget for fiscal year 2019. While bond bills are typically passed every five years, in this case there were six years between bills. To adjust for this difference and make direct comparisons, this report compares total investment for five-year time periods or compares average annual spending amounts that also include fiscal year 2019.
5 In addition to state bonds, capital budgets sometimes include funds from other sources, such as federal funds or operational funds. This report looks specifically at the growth in state capital spending and does not include these other funds. Funding from other sources was $79 million in fiscal year (FY) 2019, $34.7 million in FY 2020, $1 million in FY 2023, and zero for all other years. If all funding sources are included and adjusted for inflation, housing capital budgets for FY 2025-2029 are approximately 19.2 percent higher on average than housing capital budgets for FY 2019-2024. However, it is possible that additional funding from other sources will be included in future housing capital budgets as well.
6 Calculations based on US Census Bureau data: Table B25070, American Community Survey 1-Year Estimates for 2018-2023. For 2020, the 5-Year Estimates were used because 1-Year Estimates were not available for that year.
7 Calculation based on US Census Bureau data: Table B25074, American Community Survey 1-year Estimates for 2023.
8 The need for housing assistance is partially a function of income, and there is also a need for policies that raise wages and boost the incomes of low and middle-income renters in addition to direct housing investments.
9 Citizens’ Housing and Planning Association (CHAPA), Protecting the Commonwealth’s Investment: Securing the future of state-aided public housing, Page 19, June 2001.
10 The Boston Globe, Massachusetts’ public housing is deteriorating. The cost to fix it could be billions., May 2023
11 ProPublica, Massachusetts’ Highly Touted Push to “Significantly Reduce” Affordable Housing Vacancies Barely Made a Dent, March 2024
12 Commonwealth of Massachusetts Executive Office of Housing and Livable Communities, Advisory on initiative to reduce public housing vacancies, September 2023
13 Massachusetts Legislature, Text of 2018 housing bond bill
14 City of Boston, Mayor Wu Proposes Transfer Fee on Certain Real Estate Sales to Fund Affordable Housing, Press release, January 2022
