Narrative-first, evidence-driven

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What they did

Montgomery County, Maryland took $100 million in public bonds and turned it into a construction loan fund that finances housing the private market won’t build. [confirmed]

Here is the trick: the fund only covers about 20% of each project’s total construction cost. [confirmed] The rest comes from other sources. Loans get repaid when each project is finished and locks in permanent financing. Then the money recycles back into the next project. In theory, $100 million can support up to $1 billion in total housing development over 10 years, because it keeps moving. [confirmed projection, theoretical maximum; National Housing Crisis Task Force]

Every project must permanently deed-restrict at least 30% of its units affordable: 20% at or below 50% of Area Median Income, 10% at or below 65-70% AMI. [confirmed] Not for 15 years, not for 30 years. Permanently.

The fund is administered by the Housing Opportunities Commission (HOC), the county’s public housing authority. It was approved in two $50 million tranches: August 2021 and May/June 2022. [confirmed]

Why it worked (the mechanism)

The market fails to build affordable housing in a place like Montgomery County for a simple reason: rents at 50% AMI do not cover construction costs. A developer doing the math walks away.

The HPF does not change that math by subsidizing the whole project. It fills a specific capital gap, the construction-period financing that is hardest to assemble for mixed-income projects, and attaches a permanent affordability string. Market-rate units in the same building cross-subsidize the affordable ones. The county’s role is precisely targeted: bridge the gap no one else will fill, and in exchange, lock in affordability forever.

HPF skips the complex federal LIHTC stack entirely, and unlike LIHTC, affordability never expires. [confirmed, HOC HPF page] Permanent beats complicated.

The gross annual bond appropriation for the full $100 million fund is approximately $2.7 million per year. [plausible, gross figure before interest return; the actual net cost is lower but unconfirmed in primary county budget documents; see Research Gap note below] After the bonds are paid off in roughly 20 years, the revolving fund runs at near-zero marginal cost. Some advocates call this “virtually free housing”, that framing ignores opportunity cost and bond issuance risk, so I am not using it. The underlying math is genuinely favorable. [plausible, Social Housing Center analysis; see Research Gap on cost reconciliation]

This model won the 2024 Ivory Prize for housing innovation, recognition of its innovative approach, not a performance verdict on a model still proving itself out. HOC’s president presented it to the Oregon Legislature in 2025. [confirmed] People are paying attention.

Mechanism evidence

HPF outputs

• Completed: The Laureate at Shady Grove, 268 units, 80 of them affordable (67 at 50% AMI, 13 at 70% AMI), open as of 2024. [confirmed]
• Under construction: Hillandale Gateway, 463 units (308 multi-generational, 155 senior), 54% affordable at 30-80% AMI, $303 million total financing closed October 2024, completion estimated 2027. [confirmed]
• Pipeline: The Sage (413 units), Wheaton Gateway (780 units), Elizabeth House IV, Forest Glen Park & Ride, Avondale. [confirmed, HOC portfolio]
• 20-year projection: 6,000 total units; 1,800 permanently affordable. HOC’s 2024 interim target: 3,000+ units by 2030. [confirmed]
• Demand signal: Approximately 40,000 people are on the waiting list for Hillandale Gateway’s 463 units. That is an 86-to-1 ratio. [plausible, comes from HOC/county sources; methodology not independently verified] This is a strong demand signal, but waiting lists are messy, duplicates, eligibility filters, timing, so treat it as directional, not precise.

County context

• In 2024, Montgomery County produced 3,611 new housing units, above the annual target of 2,472. Cumulative since 2019: 15,304 units, ahead of the 6-year target of 14,832. [confirmed, Montgomery Planning]
• HPF is one contributor to that number, not the whole picture. The county’s overall production performance should not be read as HPF’s performance specifically.

Time horizon: Early-to-medium. The Laureate is the only completed HPF project as of research date. Hillandale data will be cleaner at completion in 2027.

Counterfactual: Not formally established. No synthetic control study comparing Montgomery County to a similar jurisdiction without the HPF was found in sources reviewed. [unknown]

Guardrails

The permanent affordability deed restriction is the load-bearing guardrail. Unlike LIHTC, there is no clock running down. The affordability does not expire when the funding mechanism matures. [confirmed]

Structural accountability:

• HOC is a quasi-governmental body with a Commission board. Budget proposals go through a Budget, Finance and Audit Committee before full Commission approval. [confirmed]
• HOC publishes Annual Comprehensive Financial Reports. FY2022 report is publicly available. [confirmed]
• The County Council approved the fund by resolution. The Planning, Housing & Parks committee reviews HPF activity. [confirmed]
• The model has external scrutiny, Ivory Prize evaluation, Oregon legislative review, Urban Institute coverage. [confirmed]

What is missing from the guardrail picture:

• No source reviewed addresses displacement monitoring, whether HPF-adjacent development is pushing out existing low-income residents in target neighborhoods. [unknown]
• The revolving fund’s resilience to a project failure, a development that cannot secure permanent financing or completes at lower-than-projected rents, is not documented in public sources reviewed. [unknown]
• HOC’s Annual Comprehensive Financial Reports exist but were not reviewed at project-level detail. Whether any audit has flagged HPF-specific concerns is unconfirmed. [unknown]

(Unknown / not yet tested): No enforcement failure has been documented, but the model has not yet been stress-tested by a project default.

Where it broke (or where it is under strain)

The scale mismatch is the headline [confirmed]

Montgomery County needs 41,000 new units by 2030 to meet its regional housing target. [confirmed, Montgomery Planning / COG] HPF is projected to produce 3,000 units by 2030 and 6,000 over 20 years.

That means HPF addresses roughly 7-15% of the county’s stated housing need over the relevant period. Not a rounding error, but not a solution either. It is one tool.

Naturally occurring affordable housing is disappearing faster than HPF can build [confirmed]

In 2000, Montgomery County had 45,000+ naturally occurring affordable housing (NOAH) units, older, cheaper market-rate apartments that happen to be affordable without subsidy. By 2030, the county projects fewer than 10,000 will remain. [confirmed]

That is a net loss of 35,000+ NOAH units over 30 years. HPF adds 6,000 units over 20 years.

The program is building in one direction while the floor is falling in the other.

The income floor gap [confirmed]

HPF’s affordability minimums are 50% AMI and 65-70% AMI. For a household earning 30% AMI in Montgomery County, roughly $39,360 for a family of four, a unit priced at 50% AMI is still out of reach under standard affordability rules. [confirmed]

Homelessness and deep poverty are not what this fund was designed to address. That is not a criticism, it is a design constraint worth naming. Whether any HPF-funded units serve households below 30% AMI is unclear from fund-level policy; some Hillandale units may reach this level, but that is project-specific, not a fund requirement. [unknown]

The fund is capped, with no publicly announced expansion as of February 2026 [plausible]

As of February 2026, seven projects have maxed out the $100 million fund, per Pro Builder (2024). [plausible, single source] No second phase or fund expansion has been publicly announced as of that date. If the fund does not grow, its long-run contribution is bounded by the 6,000-unit 20-year projection.

Implementation reality check [confirmed]

A December 2023 investigation by The Wash found residents unable to reach county officials, units in substandard condition, and the director of Montgomery Housing Partnership saying on the record: “No, we are not doing as much as we should have.” [confirmed, The Wash, December 2023] The report does not single out HPF specifically. But the pattern is worth naming: a well-designed financing mechanism does not automatically fix navigation, responsiveness, or unit quality. The money and the delivery experience are different problems.

The mixed-income model has a stress scenario [plausible]

The model depends on market-rate rents cross-subsidizing affordable units within each building. In a prolonged market downturn or sustained rent softening, the cross-subsidy math could weaken. No stress-test data for this scenario is publicly available. [plausible, structural inference, no primary source]

One signal worth noting: a July 2025 commentary in Montgomery Perspective raised concerns about the multifamily rental market in Montgomery County, suggesting broader rental market stress in the county. [plausible, single source, advocacy-adjacent outlet] This is one data point, not a documented trend. But it bears on the cross-subsidy assumption directly, if market-rate rents in the county soften, that is the load-bearing variable in this model.

Hillandale Gateway’s total financing was $303 million for 463 units, roughly $654,000 per unit. [confirmed via calculation] Whether this is better or worse than comparable LIHTC projects in the same market is unknown; no cost-per-unit comparison to LIHTC or market-rate construction was found in sources reviewed. [unknown, see Research Gap]

Public verdict

The fund is winning national recognition. Ivory Prize 2024. Oregon legislative interest. Urban Institute coverage. NPR feature (October 2024). [all confirmed]

Locally, the picture is mixed. The county is outpacing its overall housing production targets, 15,304 units since 2019, ahead of a 14,832-unit target. [confirmed] That is a real result. But the 40,000-person waiting list for a 463-unit development [plausible, HOC-sourced] and a 2023 investigative piece describing residents unable to navigate the system suggest the need is running well ahead of the supply.

The verdict is still forming. The Laureate is the only completed HPF project. The real test arrives when Hillandale opens in 2027 and when the first project reaches the refinancing step of the revolving cycle.

What scaling it would require

Three levers would need to move for this model to address the actual housing gap, not just demonstrate proof of concept:

1. Fund expansion. $100 million with a 20-year horizon produces 6,000 units. The gap is 41,000 units by 2030. Scaling up requires either more tranches (county appropriation) or state-level replication. Oregon is watching. That is the right signal, but no state-level version was announced as of research date. [confirmed/plausible]

2. NOAH preservation running in parallel. The county is losing 35,000 affordable units from aging market-rate stock. New production alone cannot offset that. A preservation strategy, acquiring and restricting NOAH units before they convert to market rate, would need to run alongside HPF, not instead of it. [confirmed gap, no specific program found in sources reviewed]

3. Deeper affordability floors. HPF does not reach 30% AMI households by design. Closing that gap requires a different tool, project-based vouchers, deeper subsidies, or dedicated extremely-low-income units funded separately. The HPF mechanism is not designed for this and should not be asked to do it alone.

Policy environment

What the HPF needs to function:

• A county government willing to appropriate annual bond service payments (~$2.7 million/year gross [plausible, gross appropriation before interest return; net figure unconfirmed in primary documents]) and absorb bond issuance risk.
• A housing authority with development capacity, balance sheet strength, and institutional knowledge to execute mixed-income projects.
• Market-rate rents high enough to cross-subsidize affordable units within the same building, Montgomery County ranks 15th in median income [confirmed] and 9th in median rent [plausible] nationally, which makes this math easier than most places.

What would need to be true for the pattern to scale nationally:

Legal authority - State-enabling legislation allowing local housing authorities to issue bonds for this purpose. Not all states permit it.

Capital - Federal or state “fund the fund” capital to seed HPF-style programs where the local income base is thinner. Without it, the cross-subsidy math breaks before the fund can be structured.

Complements - NOAH preservation (right of first refusal laws, preservation funds) and zoning reform that allows the density mixed-income math requires near transit. Without these, HPF-style funds produce units while the surrounding market erases them.

North Star verdict

Partial reinforcement, with the gap named plainly.

security -> choice -> competition -> shared gains -> more security

The HPF is government doing exactly what the North Star says government should do: reduce the monthly squeeze, fill the gap the market will not, and structure it so the fix is permanent rather than expiring. The mechanism is real. The financial innovation is genuine. The permanence of the affordability restriction is meaningful in a world where most affordable housing policy comes with a clock.

But the loop only helps the people who get a unit. At 6,000 units over 20 years against a 41,000-unit gap, plus 35,000 disappearing NOAH units, the fund makes a dent, not a repair. And it does not reach the households in deepest poverty: 30% AMI and below, the people most desperate for the loop to run.

Permanent beats temporary. One tool is not a system.

This is how you lower the squeeze without building a bureaucracy moat: simple financing, permanent rules, measurable outputs.

The honest verdict: this is what a promising tool looks like, with one revolving cycle still to prove. The problem is that one promising tool is not enough, and the county has not announced what comes next.

For a regular person watching this: one specific, testable ask, attend a Montgomery County Planning, Housing & Parks committee meeting or submit public comment the next time a HPF expansion comes up for a vote. The waiting list has 40,000 names on it [plausible, HOC-sourced]. The fund that produced 463 units is capped. Those two facts belong in the same sentence when county officials are deciding whether to fund a second phase.

Research gaps

Rule: If any [RESEARCH GAP] is load-bearing for a claim in the top sections, do not publish that claim until the gap is closed.

1. [RESEARCH GAP: Cost per unit] No primary source provides an HPF cost-per-unit figure vs. comparable LIHTC or market-rate projects in Montgomery County. Do not publish a cost comparison claim without this.
2. [RESEARCH GAP: Net cost reconciliation] The “$2.7M/year” gross figure vs. “$600K/year per tranche” net figure discrepancy needs a primary county budget document to resolve. Current cost claims sourced from an advocacy-aligned secondary source (Social Housing Center).
3. [RESEARCH GAP: Loan interest rate] The 5% construction loan rate appears in one secondary source (Social Housing Center). Not confirmed in HOC primary documents. Label as plausible until HOC loan agreement or board minutes confirm it.
4. [RESEARCH GAP: Actual rents at The Laureate] The Laureate is confirmed open. Actual rents charged vs. 50% AMI rent limits for the county are not verified in sources reviewed.
5. [RESEARCH GAP: Displacement monitoring] No source reviewed addresses whether HPF-adjacent development is displacing existing low-income residents in Hillandale, Wheaton, or Shady Grove corridors.
6. [RESEARCH GAP: 30% AMI coverage] Whether any HPF-funded units serve households below 30% AMI is unconfirmed at the fund level. Hillandale’s 30-80% AMI range may reach this threshold but the detail is project-specific.
7. [RESEARCH GAP: Fund expansion status] No expansion beyond the $100M cap has been publicly announced as of February 2026. Confirm current status before publication in case this has changed.
8. [RESEARCH GAP: HOC audit findings] FY2022 Annual Comprehensive Financial Report is publicly available but was not reviewed at project-level detail. Confirm no material HPF-related findings before promoting this case study.

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