New England Housing Finance Agency Leaders Share Optimism for 2026

Gathered at the 2025 Fall Developers Forum in Boston, five leaders from Housing Finance Agencies (HFA) throughout New England detailed the challenges their states face building affordable housing going into 2026.

Coming together at the Raffles Hotel in early November, the industry veterans described a shifting development landscape, from rising construction costs to the regional impact of the increase in nine percent Low Income Housing Tax Credits (LIHTC) through the passage of the One Big Beautiful Bill Act (H.R. 1). Despite setbacks, the panelists expressed optimism, with a sense that federal boosts to the LIHTC program (such as the lowering of the Private Activity Bond threshold from 50 percent to 25 percent and the increase in nine percent LIHTCs) could help spur development. 

In Massachusetts, for example, these “exciting” changes could lead to about a dozen additional deals annually, said Rebecca Frawley Wachtel, LIHTC and HOME program director for Massachusetts’ Executive Office of Housing and Livable Communities. “Volume cap has been in such serious demand, but I think these changes will help clear out some of the deals that were ready but were waiting.”

Need for Soft Subsidies
Though the impacts of H.R. 1 are expected to boost the number of approved projects each year, several panelists cautioned that more soft subsidies will be needed in order to make the expanded deal-load pencil. Soft subsidies are flexible or deferred debt or grants, usually given by states, municipalities, or nonprofits, and often provide crucial funding needed to fully finance a development, as LIHTC proceeds alone are rarely enough to capitalize a project in today’s costly environment.

“Double the number of deals requires double the number of subsidies technically,” said Nandini Natarajan, chief executive officer and executive director of the Connecticut Housing Finance Authority. “Connecticut has seen an incredibly supportive environment at the governor’s office and the legislature with respect to subsidy, but it’s still not necessarily the double that is going to result from this new flexibility.”

Dan Brennan, director of MaineHousing, also highlighted the importance of soft subsidies in Maine, saying they are the “driver of their deals.”

“We’ve been able to absorb a tremendous amount of investment from our state over the last five years to nearly triple our construction rate,” Brennan said. He estimated that this tripling was largely made possible through an outpouring of roughly $350 million of state funding into MaineHousing, as well as a steady deployment of both HOME Investment Partnerships Program dollars and Housing Trust Fund dollars to make deals pencil.

Elsewhere in New England, more challenging cost and political environments leave local leaders guarded in their estimations for future construction. For example, Rob Dapice, executive director and chief executive officer of New Hampshire Housing (NHH), said his agency is currently focused on lobbying efforts that will make sure the $5 million they receive annually from the state does not go away. “We’re pulling things together and trying to keep the deals that we have in the pipeline feasible as opposed to envisioning an expansion in the number of deals we do,” he said.

Additionally, in housing-challenged Vermont, limited subsidy dollars may leave new LIHTC resources under-utilized. “I don’t think the 25 percent rule is going mean more deals without subsidy in Vermont,” added Maura Collins, executive director of Vermont Housing Finance Agency (VHFA). “It is a welcome change, and I would love to be proven wrong.”

Rising Costs Require Creative Solutions
Panelists also pointed to inflationary challenges and rising costs as top-of-mind concerns heading into 2026. “The idea of getting excited about a lot more deals in this inflationary environment is a bit muted,” Collins said, noting that the average cost for nine percent deals in Vermont has risen from about $560,000 per unit in 2024 to “well over” $600,000. She said that the agency had even received applications for projects in excess of $700,000 per unit.

The rising expense of development has led some agencies to put per-unit cost caps into their QAPs. New Hampshire’s Dapice said his agency recently implemented caps following public scrutiny over the cost of projects. Currently, Total Development Costs (TDC) are capped at around $440,000 per unit, and the agency is now exploring whether to raise the cap to between $460,000 and $480,000 per unit in the next issued QAP.

Collins said that VHFA’s qualified allocation plans (QAP) do not include arbitrary caps on costs. “Constraints don’t match reality,” she said. “The cost escalations are real. The hard-working people building these buildings are being paid more and I don’t want to see that change. The material costs are legitimately going up. The land value in Vermont continues to escalate.”

Rather than implementing a cap, Collins said her agency is working to amend its QAP to contain detailed information on how costs will be assessed in the application process, which VHFA plans to launch for the 2027 funding round. The agency is developing a matrix on the cost drivers impacting affordable housing. It will include sections on the costs of permitting, tariffs, Build American, Buy America, brownfield redevelopment and “all the pubic policy goals that we layer in and expect if you are going to get our tax credit.” The matrix will have additional columns on what VHFA and the state can do to lower these costs.

In New Hampshire, NHH is exploring more direct ways that their QAP can lower TDC. “We eliminated points in our last revision for passive solar, net zero, LEED, things like that,” he said. “If those come back in the next edition, I think they will be back as a weaker incentive,” he added.

Additionally, Dapice pointed to a statewide effort to streamline building regulations via the adoption of a “one state, one code” policy. This initiative allows only the state legislature to amend the state’s building code, precluding local jurisdictions from adopting their own requirements. 

Natarajan said that her agency in Connecticut is looking at the development application and funding process holistically to help to cut costs, trying to remove redundancies in the process of underwriting, and approving deals efficiently in order to cut time and therefore lower costs. They are also reviewing their architectural review and construction standards to look for cost efficiencies. They recently hosted a meeting with investors and syndicators who regularly work in the state to see if there was a way to jointly reduce the amount of time it takes for a deal to get from underwriting to closing.

Still, Natarajan said that she views higher costs to be inherently baked into the LIHTC program. “If we are going to be honest, I think we have to admit that structurally, the tax credit program has elements that incentivize greater cost because that is what drives basis.”

Transit Oriented Development
One gap-filling incentive that states have recently turned to is rewarding Transit-Oriented Developments (TOD). For Natarajan, this has become a vital strategy in Connecticut, where the state’s five-year Community Investment Fund initiative plugs some gaps in otherwise underserved urban areas, with an emphasis on TODs.

The fund is managed by Smart Growth America, a relatively new federal quasi-public agency, which provides technical assistance to local leaders and jurisdictions and facilitates collaborative TOD efforts in downtown areas. It is funded through the Federal Transit Administration. 

“Coordinating between all of these different sources is difficult to do and adds a lot of complexity,” Natarajan said, but emphasized that such hard work can pay off “given the types of sites we’re seeing, and the kinds of needs Connecticut has in terms of transit and infrastructure.