This article is part of the Under the Lens series
Shelter in a Federal Storm: State and Local Housing Solutions for a Time of Federal Hostility
We dodged the bullet on Donald Trump’s proposed radical dismantling of the U.S. Department of Housing and Urban Development (HUD), a la Project 2025. So far. But these attacks are not going away.
It’s time to create a state-based system of housing finance that can withstand future HUD cuts and supplement the federal help that does exist. This can be done by creating new cross-jurisdictional finance authorities through interstate, regional, and even inter-local compacts. These authorities can emulate the traditional affordable housing finance roles and flexibility of the federal government.
Like the federal government, the new authorities can be structured to pool public revenue collected from multiple jurisdictions, issue public debt, sidestep strict budget-balancing rules that affect member jurisdictions, and provide capital and operating subsidies to participating partners while respecting their sovereign powers over land use and control. These authorities can increase state and local funding for the construction and rehabilitation of middle-income and deeply affordable housing, support employment and workforce development, and assist in siting housing near other essential services such as transportation, health clinics, and education.
Partnerships between states and localities are already somewhat common when it comes to the construction and maintenance of bridges, ports, and water infrastructure. Examples include the Port Authority of New York and New Jersey (PANYNJ), the Washington Metro Area Transit Authority, or WMATA (of Maryland, Virginia, and Washington, D.C.), the Delaware River Port Authority (of Pennsylvania and New Jersey), and the seven-state New England Interstate Water Pollution Control Commission. Each of these partnerships is justified by the cross-jurisdictional benefits of the public good to each locale. (Similarly, the recognition of benefits to from cross-jurisdictional cooperation forms the rationale and basis for the federal government’s own existence.)
To date, interstate and regional partnerships in affordable housing are rare, even though housing markets are regional and affordable housing offers cross-jurisdictional benefits.
Leaders from Maryland, Virginia, and Washington, D.C., came together in 2019 to collectively adopt 2020–2030 regional housing targets for supply, location, and affordability, and have pooled resources from the Amazon Housing Equity Fund to provide planning grants to selected projects.
The San Francisco Bay Area Housing Finance Act (BAHFA), passed in 2019, offers an intrastate model. BAHFA created a regional housing finance agency for the Bay Area’s nine counties and 101 cities and towns. Designed to be financed through local taxes and bonds, it requires approval by two-thirds of voters in each county via a regional revenue ballot measure. This high bar has caused officials to delay putting the measure before voters. BAHFA has been operating pilot programs using state grants and is now recalibrating its finance strategy, focusing on laying the groundwork for a ballot measure as early as 2028.
Interstate compacts are the most formal path to collectivity and are authorized under the Compact Clause of the U.S. Constitution. This has produced, according to the National Center on Interstate Compacts, over 250 compacts to date, including ones related to Medicaid, child placement, carbon emissions allowance trading, and the environment. Although technically conditioned on federal approval, most operate without it, as established case law permits agreements that delegate state powers already possessed.
But states have also bypassed interstate compacts with the use of coordinated action among state attorneys general on a host of issues, and cross-border memorandums of understanding or commissions have been used to govern roads or handle specific environmental challenges.
Washington state’s Interlocal Cooperation Act authorizes state agencies to enter into joint or cooperative agreements not only with other state agencies but also with any political subdivision of another state. This has produced a joint purchasing agreement with Oregon, as well as a similar agreement between Vancouver, Washington, and Boise, Idaho, and over 2,600 other interlocal agreements.
Even local HUD-regulated public housing agencies (PHAs) may formally join with other PHAs to create subsidiaries, joint ventures, and other arrangements related to low-income housing, under 24 CFR Part 943.
The advantages to interstate and/or interlocal cooperation are numerous.
States and localities can increase their borrowing capacity through compact finance authorities, legally bypassing state and local limitations. For example, bonds, notes, and other obligations issued by the PANYNJ are not debt obligations of New York or New Jersey; they are backed only by the authority’s own revenues and reserves. This is not unusual. Most state constitutions exclude interstate or other “independent” authority bonds from the state’s own constitutional debt limit.
Compact finance authorities also offer a less political and more expedient process for bond issuance. As the Delaware Port Authority declares on its website, “Authorities are governed by appointed boards or commissions rather than by elected officials so their leadership typically is less sensitive to political pressures. Together, appointed leadership and the lack of a need to seek voter approval for projects makes authorities more politically insulated than other units of government.”
As BAHFA’s experience indicates, authorities can be crafted with varying degrees of public participation and limitations. (Bond rating agencies prefer that authorities have a certain degree of operational independence.)
Most finance authorities are also not bound by the strict balanced budget requirements of state constitutions. Like WMATA, they may have their own requirements, but they generally have more flexibility in meeting them. The PANYNJ, for instance, “strives” for a balanced budget. The Delaware River Port Authority is constrained only by the trust agreement with its bond underwriters, which prioritizes debt service on the bonds.
Interstate housing financing authorities could also go beyond brick-and-mortar bonding aid and assist with operating subsidies for rental housing. Member-pledged appropriations could be pooled into an operating subsidy fund, with project-based assistance provided by segregated subaccounts. These subsidies could not only fill gaps left by the federal government but also encourage states and localities to issue their own vouchers. When a single state or locality experiences a budget crisis due to a climate-related disaster or an unforeseen drop in tax revenue, pooled funds would enable subsidies to continue, drawing funding from other localities and effectively operating as a “risk-sharing” structure like private insurance.
An interstate finance authority might also take a page from state housing finance agencies and be structured to underwrite or back mortgages, issue mortgage securities, and use the interest rate spread in bonds and mortgages as revenue.
Of course, states and localities would have to commit revenue sources to the authority. These could include surtaxes on property transfer and deed recordation, development impact fees, excise taxes, or linkage fees. Given the universality of housing affordability problems, it would make sense to go beyond housing-specific funding sources and also make use of state income and property taxes.
Federal tax revenue will be reduced by about $4.5 trillion under the 2025 federal mega bill. States and localities could effectively “capture” what was previously federal revenue by delinking state taxes from the federal code, requiring wealthy households and businesses with tax cuts to pay their fair share, and devoting the revenue to the fundamental human need for housing.
Partnerships may be challenging to form, but the benefits would be significant. We can achieve more together than we can apart.
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Redlining is still being practiced here in South Georgia. I’m researching Insurers now, Top of my list All State, State Farm and Progressive.
Affordable housing is extremely necessary!
Please continue to work on this issue for the people of this country! Affordable housing is extremely important to our people!
Lowering utility costs is a great idea to help the people of our country be able to afford housing !