Leaders in the Finger Lakes region could address the mounting housing crisis by implementing innovative financing solutions and leveraging state and federal programs to accelerate affordable housing development, according to a recent Fiscal Policy Institute report.
The report highlights a mix of strategies that local policymakers can use to reduce the costs of constructing multi-family housing while increasing the availability of affordable units. It emphasizes that financing costs — the burden of loans used to fund housing construction — are one of the largest barriers to housing affordability.
With a critical need for affordable housing to support the region’s workforce and economy, the report offers tools that have shown success elsewhere, including Montgomery County, Maryland.
Financing tools to unlock housing construction
The report urges local governments to develop public financing programs that reduce developers’ reliance on expensive private loans. In Montgomery County, officials used a $100 million municipal bond to create a revolving loan fund for developers, enabling construction of 1,500 housing units every five years with a mix of affordable and market-rate apartments. The public financing lowered the overall cost of housing projects and ensured affordability for families earning below the median income.
A similar revolving loan program in the Finger Lakes could provide a long-term solution to increasing housing supply while requiring minimal ongoing taxpayer funding.
For example, by issuing $10 million in bonds, a municipality could finance hundreds of affordable housing units, recouping loan repayments to reinvest in future projects. According to the report, scaling such models up with larger investments could yield thousands of units annually across the region.
Leveraging state and federal programs
The report also underscores the role of federal tools, like Housing Choice Vouchers and the Low-Income Housing Tax Credit (LIHTC), in driving affordability. LIHTC allows developers to secure equity investments by selling federal tax credits, reducing their reliance on debt and enabling them to charge lower rents. The program has been integral to affordable housing projects in New York City and could be adapted more broadly in upstate communities.
However, the report warns that demand for LIHTC credits has decreased in recent years, limiting their impact. Policymakers in the Finger Lakes could advocate for increased federal support or identify alternative funding streams to fill the gap.
Additionally, state programs such as New York City’s Affordable Neighborhoods for New Yorkers tax incentive (485-x) demonstrate how local tax abatements can stimulate housing construction. The report stresses that such incentives must be carefully targeted to projects that would not otherwise be financially viable.
State-backed lending and direct investments
The report recommends that state and local governments expand their role as low-cost lenders to developers, a strategy already used in programs like New York City’s housing preservation grants. By providing direct capital or favorable loan terms, governments can reduce financing costs and make affordable housing projects more feasible.
For example, local governments could invest in tax-exempt bonds, which carry lower interest rates, to fund affordable housing initiatives. A $20 million bond issue, according to the report, could finance between 40,000 and 80,000 housing units, depending on construction costs.
The Finger Lakes could also explore direct capital expenditures to fund new housing developments. As the report outlines, state or local governments that invest upfront in mixed-income housing projects can generate long-term rental revenue, potentially operating without additional subsidies.
Addressing construction and operating costs
While financing remains a major hurdle, the report highlights the need to address other costs of housing development, including land acquisition, construction, and ongoing operations. Policymakers could reduce land costs by partnering with municipalities to repurpose underutilized properties for housing.
Furthermore, the report calls for investments in workforce development to ensure the construction labor force can meet regional demand, ultimately lowering project costs. Efforts to streamline permitting processes and reduce regulatory barriers could also accelerate housing production.
Urgency for action
The findings come as housing affordability in New York State has reached a tipping point. Across the state, families face rising rents and housing shortages that threaten economic stability. The report estimates that constructing a single multi-family apartment can cost between $330,000 and $650,000, highlighting the need for creative financing solutions to make affordable housing a reality.
For leaders in the Finger Lakes, the report serves as both a warning and a roadmap. By adopting proven tools like revolving loan funds, leveraging federal programs, and investing in tax-exempt financing, municipalities can begin to tackle the housing shortage while positioning the region for sustainable growth.
Without intervention, the report warns, the affordability crisis will continue to drive families out of the region, straining local economies and workforce availability.
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