Maryland’s $1B budget gap tied to housing shortage, new state data shows

MARYLAND - Maryland is facing a budget shortfall of more than $1 billion, and new state data shows a growing housing crisis is a major factor behind it.

State officials say the lack of housing, especially affordable housing, is driving people out of Maryland, shrinking the tax base and making the state’s financial problems even worse.

At the same time, lawmakers are preparing to make difficult budget decisions that could include spending cuts or tax increases, housing advocates warn that failing to address the shortage will only deepen the problem.

Housing Costs Pushing People Out

A growing problem:

The Maryland Department of Housing and Community Development says housing costs are now a key reason people are leaving the state — particularly younger residents.

"Young people are leaving the state in droves because of housing costs," said Dr. Scott Gottbreht, Assistant Secretary for Policy at the department. "Before the pandemic it was largely seniors leaving for better tax benefits. Now it’s young people leaving because they can’t afford to live here."

New data from the state’s Housing Needs Assessment shows homeownership is slipping further out of reach.

In 2020, 70% of Maryland households could afford to buy a home. By 2022, that number had fallen to just 49%.

"Homeownership is increasingly out of reach for Maryland households," Gottbreht said. "That’s one of the most alarming findings in the report."

A ‘Game of Musical Chairs’

What we know:

Housing advocates say the shortage is creating intense competition — with families and workers getting squeezed out.

"It becomes a game of musical chairs," said Tom Coale, an attorney representing the Maryland Affordable Housing Coalition. "Those with more money get a chair. Those with less money get left out — and that creates serious consequences for our social safety net."

Coale says those consequences are showing up in schools and communities across the state.

"We have students who aren’t sleeping well because there are too many people in one room. We have students sleeping in cars and still going to school every day," he said.

The Numbers Behind the Shortage

Dig deeper:

A newly released report from the Maryland Department of Housing and Community Development shows the state is falling far behind on new construction:

Maryland currently permits about 18,000 new housing units per year

The state needs nearly 39,000 new homes annually by 2030 just to keep up with demand

The shortage is driving:

• Higher home prices and rents
• Families spending a larger share of their income on housing
• Workers and residents moving to more affordable states
• As people leave, Maryland collects less in income and property taxes — adding pressure to an already strained state budget.

The Fight Over Affordable Housing Funding

Big picture view:

Housing advocates say one program is especially critical: Rental Housing Works, Maryland’s main gap-financing program for affordable housing development.

"Rental Housing Works is the most powerful and impactful funding program for affordable housing in the state," Coale said. "What we don’t want is to cut this program because then affordable housing developers will have to look elsewhere for funding."

Advocates warn that cutting the program would dramatically slow or halt affordable housing projects across Maryland.

The Three Major Housing Bills

The breakdown:

Gov. Wes Moore has introduced three major bills aimed at boosting housing production and reducing delays.

Dr. Gottbreht says the legislation is designed to unlock new housing supply across the state:

"One is the Starter and Silver Homes Act, which will make it easier to build smaller homes throughout the state," Gottbreht said. "In other contexts, that has reduced homeownership prices by about 30 to 40 percent."

The second proposal is the Maryland Transit-Oriented Development and Housing Authority Act, which would allow more housing to be built on state-owned land, especially near transit hubs.

The third bill, the Housing Certainty Act, is designed to protect housing projects from shifting regulations after they are already approved.

The bill would lock in the rules at the time a project is permitted, allowing developments to move forward even if regulations change later — a move supporters say would reduce unnecessary delays and lawsuits.

Leaders Under Pressure

What's next:

Lawmakers return to Annapolis next week, where both the budget deficit and the housing shortage are expected to be two of the biggest battles of the legislative session.

With billions in revenue at stake and housing costs continuing to climb, state leaders now face growing pressure to fix both problems at the same time.