Meeting the Moment: Federal Housing Policies and Massachusetts
By Amy Dain
July 29, 2025
Much of the action of housing policy is state and local, such as decisions about what can be built where. But the federal government plays a central role too. The federal safety net for housing dwarfs state-funded supports. Federal policies undergird the macroeconomics of homebuilding, home purchasing, and renting. In partnership with states and municipalities, federal investments in infrastructure help knit regions together around housing. Federal laws protect fair housing rights. And the federal government has the heft to protect neighborhoods from some risks of climate change.
Production
Greater Boston’s current affordability crisis has largely been caused by insufficient production. In the macroeconomic paradigm, this is where insufficient supply meets rising demand. The main culprit has been state and local government—specifically, municipal over-restriction of homebuilding as well as a lack of state leadership to allow and plan for the needed housing. The shortage was exacerbated by the Great Recession’s pause in construction and shuttering of many small building firms.
Federal policies can also spur, or constrain, housing construction. Recent federal reforms push in both directions. On the one hand, the “One Big Beautiful Bill” act (the Act) includes a substantial expansion of the Low Income Housing Tax Credit (LIHTC), which supports housing production of both affordable and mixed-income projects. On the other hand, federal tariff policies and immigration restrictions seem likely to raise construction costs.
In the plus column, the expansion of LIHTC is considered the largest expansion of affordable housing resources in a quarter century. Tax credits are an alternative to direct federal investment in subsidized housing. The program allows developers (for-profit and nonprofit) of affordable or mixed-income housing to sell tax credits to raise capital for construction, reducing the debt burden on their projects. Many projects cannot move forward without the subsidy. Expansion will make more developments financially viable. One estimate suggests the expanded LIHTC could lead to 35,200 additional affordable rental homes in Massachusetts over 10 years, though rising construction costs could reduce that total. The Commonwealth’s goal is to gain 222,000 homes in the next ten years.
In the minus column, though, tariffs increase the cost of construction. Builders import much of their lumber from Canada, and many appliances from China, for example. Reductions in immigration would shrink the construction workforce, which may soon also contract from retirements. One estimate holds that a third of construction workers in America are undocumented. A higher percent of construction workers are immigrants generally. Federal tariff and immigration policies are both still in flux. In general, higher costs for construction inputs and labor translate into higher home prices.
Meanwhile, higher national debt can put upward pressure on the cost of borrowing, which would add costs to both home construction and home purchases. The Congressional Budget Office estimates that the Act will increase the national debt by $3.4 trillion.
A vibrant economy gives most households the resources to afford homes—to pay mortgages and maintenance—when housing is abundant. Accelerated production of homes can stabilize prices. Even in a situation of housing abundance, however, the costs of home maintenance, mortgages, utilities, and insurance remain substantial. Those costs will be paid by homeowners or passed through to renters. Incomes matter for housing stability.
Many new federal policies, adopted or proposed, pose threats to the overall economy; they are beyond the scope of this presentation. It is worth noting, though, that a shaken economy undermines households’ ability to pay for homes—even as it depresses prices. While high home prices are a crisis, sharp declines can be too.
And certain federal policies could have direct impacts on demand for housing. Massachusetts welcomed 82,000 international students last year and almost one in five residents is foreign born. Severe drops in international student visas or immigration could tank housing demand in some areas, leaving landlords without sufficient funds to maintain properties or pay their mortgages. Hits to the local economy from cuts to research and healthcare spending, for example, could have the same effect.
Higher vacancy rates have the effect of moderating prices, but how the rates are raised matters. Far better than tanking demand is to build more housing. Production promotes the benefits of a growing, vibrant region. By contrast, if vacancy rates rise because the economy weakens or population growth is held back, the result is not stability but contraction: a shrinking tax base, disinvestment, and households struggling to afford homes even at discounted prices.
Safety Net
The federal government is the primary funder of the housing safety net nationally, including rental assistance, public housing, LIHTC, and other housing programs. Massachusetts does directly allocate substantial funding for housing vouchers and affordable housing, but the sum is far smaller than the scale of federal support. Federal Housing Choice Vouchers, for example, keep approximately 97,000 households stably housed in Massachusetts; the Massachusetts Renter Voucher Program does the same for about 10,000 households.
Earlier this year, the Trump administration proposed major cuts to the housing safety net through its budget proposal, including deep reductions to Housing Choice Vouchers (or “Section 8”), one of the core programs keeping low-income families housed. In Massachusetts alone, Housing Choice Vouchers currently provide roughly $1.8 billion in housing support. Slashed spending on vouchers would increase homelessness and be a human tragedy. It would also destabilize housing markets in some neighborhoods.
The executive’s budget proposal recommended cutting more than $26 billion in rental assistance, implementing time limits of two years for receiving assistance, eliminating some housing programs, and shifting toward block grants that would combine funding for vouchers, affordable housing development, and other programs.
The federal budget allocations for the housing safety net are still being negotiated by Congress as of this writing. Trump’s full proposal will not be adopted by Congress in the immediate future. Still, the House Appropriations Committee passed a Transportation-HUD (THUD) funding bill that level-funds Housing Choice Vouchers, cuts other funding for public housing, and reduces HUD funding overall, formalizing a 26 percent cut in HUD staff. The Senate Appropriations Committee’s bill includes higher funding levels than the House version.
Level funding of vouchers is a cut to services, in effect, anywhere with escalating rents. Greater Boston is already feeling this. Right now, few people can move off the long waitlists for vouchers.
Other cuts to the social safety net (for example health insurance), as well as cost inflation for basic goods, can also affect housing stability for low-income households. Cuts to Medicaid approved in the Act will impact supportive housing for seniors and people with disabilities.
Place-Based Investment
Housing fulfills its purposes not only by having roofs, kitchens, and bedrooms, but also by having location. People look for housing near their jobs and extended families, transportation routes that can take them where they need to go, and institutions they rely on. Housing typically comes as a package with infrastructure, such as roads and sidewalks, bus and train routes, sewer systems and streetlights. While the Commonwealth pitches in far more funding for infrastructure than the federal government, federal investments are a critical piece of the funding puzzle. Significant federal dollars are needed for the transit and sewer upgrades that would make residential growth viable at scale.Potential major cuts to federal infrastructure spending or to any category of public service can have downstream impacts on residential neighborhoods and the state’s housing situation generally. As one example, the Trump administration and Congress eliminated certain funds in a grant program that included $335 million set aside for the realignment of the Mass Pike in Allston. The project would create space for a new residential neighborhood and knit together a part of Boston severed by the highway. Next steps for the project are now under review.
In June, a federal judge blocked the Trump administration from withholding transportation funds from states that do not collaborate in enforcement of certain immigration policies. Overall, the situation of federal funding for infrastructure is in flux.
In 2024, the Massachusetts Affordable Homes Act established an Office of Fair Housing within the Executive Office of Housing and Livable Communities. This office will provide education on fair housing rules, support organizations working to protect housing rights, and manage a new Fair Housing Trust Fund (made up of state funds). State and local leaders do not need the federal government’s blessing to continue the work of this office, or to reform exclusionary zoning policies that have significantly segregated the region and undermined social mobility.
That’s good because the Trump administration has been shutting down efforts to address the disadvantaging of certain populations within American institutions. Attempts to scale back fair housing policies—which are meant to protect people from discrimination—are in that scope. This past winter’s pause in some federal disbursements included funding for fair housing offices in Massachusetts. The Commonwealth’s Attorney General Andrea Campbell joined a coalition opposing the HUD rollback of grants. Courts reinstated the disbursements.
In June, the Trump administration proposed a rule to roll back HUD’s Affirmative Fair Housing Marketing regulations. The current regulations require federally funded housing entities to conduct broad outreach to eligible households, especially those least likely to apply for assistance.
Climate change poses a major threat to housing stability and affordability. Climate change leads to more frequent and extreme fires, flooding, and storms, which are increasingly ruining homes and neighborhoods. As prevention, worldwide coordination and commitment is needed to reduce emissions. The current administration has refused that charge.
Governments also need to respond to climate threats by improving infrastructure and bolstering emergency response. Federal preparations for climate change and disaster response are necessary to decrease the vulnerability of homes and households. Rising insurance premiums due to climate change are already adding to the cost of housing. State efforts to protect homes from extreme weather, as proposed in the Massachusetts environmental bill, the Mass Ready Act, should supplement federal initiatives.
The Trump administration, however, has closed the FEMA disaster preparedness grant program. This program’s closure cost the Commonwealth about $90 million in expected funds for stormwater and flood infrastructure. Massachusetts has joined a coalition of states suing the administration.
Emergency Shelter
One outcome of the decades-long housing shortage in the Commonwealth has been increasing homelessness. A strong economy and social safety net, including public housing, housing vouchers, supportive housing, and emergency shelter systems, can minimize homelessness and its effects, even with a shortage of homes. Threats to the economy and safety net are harbingers of growing homelessness.
The "One Big Beautiful Bill” act will strip Medicaid from hundreds of thousands of vulnerable adults—after the mid-term elections. The loss of care for addiction and mental health conditions could lead to greater housing instability. Meanwhile, the Trump administration is shifting away from the “Housing First” model, instead promoting an approach that requires sobriety and treatment for people to gain publicly supported long-term housing. And, it proposed cuts (not adopted) to housing for the elderly, housing for the disabled, and permanent supportive housing.
Federal changes to the Temporary Protective Status (TPS) of some homeless immigrants could affect their ability to access emergency housing, pay rent if they have obtained housing, and maintain employment. Also, the Trump administration has been adding language to Continuum of Care contracts, which support homeless assistance programs, to restrict use of funding to achieve goals of diversity, equity, and inclusion, and to restrict support for transgender people and undocumented immigrants. On July 25, the administration agreed to pause efforts to block undocumented immigrants from accessing certain social services in states that sued over the efforts. Massachusetts was a part of the 20-state coalition that sued.
ConclusionSo far, federal actions have not immediately changed the overall housing crisis that has been unfolding for decades. Yet federal reforms—some proposed and some already in-the-works—could turn up the heat on housing costs or cause precipitous price decline. Unfortunately, either outcome, drastic rise or fall, would fail to bolster housing stability. The good news for housing is, first, the expansion of LIHTC; second, that some federal proposals, for example to reduce voucher support, have not been adopted; and third, the courts have reversed some federal actions, such as the cancelation of fair housing programs.
Ideally, the federal government would protect the housing safety net, continue overseeing economic prosperity, invest in transportation and infrastructure to support residential growth, support the goals of fair housing, and plan for the real threats of climate change. Then the state’s role would be twofold. First, the Commonwealth would continue to supplement those federal investments and protections. Second, the Commonwealth would roll back the barriers to needed housing development, which it has failed to do so far.
With so much uncertainty in the federal landscape, it can be hard to know which scenarios to prepare for and respond to. Even with more certainty, it is hard to respond to large-scale sudden change. Still, Massachusetts leaders are watching and preparing. Boston Indicators will continue offering analysis of the changing landscape.