Alaska’s Affordable Housing: Addressing a Growing Crisis

There are many bright spots in Alaska’s economy: The state is experiencing a strong economic environment, marked by solid gross state product growth and job expansion. Significant infrastructure investments—including broadband, transportation, port, military and energy—are driving development, supported by the highest per capita federal funding in the nation. Natural resource revenue further bolsters the economy. The Alaska job market remains strong, particularly in the construction sector, contributing to a positive overall economic outlook.

And yet there is a dark cloud on the horizon—and it’s threatening not only the strength of the state’s economy but also the success of its residents: affordable housing.

Jonathan Tibbs, Vice President at Northrim Bank, sees the implications firsthand through his role as a commercial lending officer and lead of the Bank’s newly established affordable housing task force. In conversations with stakeholders, Tibbs is hearing that doctors recruited to Southeast Alaska are routinely declining job offers—not due to weather or isolation—but simply because they can’t find adequate housing. “They’re looking at housing inventory and leaving, never coming back,” Tibbs said.

However, this issue extends beyond high-income professionals; essential workers with solid, good-paying jobs, like firefighters, educators, law enforcement officers and seasonal workers find themselves priced out of or unable to find suitable housing. According to Tibbs, the average wage in Fairbanks equates to approximately $66,000 annually, while the typical two-bedroom home now costs around $330,000, resulting in mortgage payments that can consume 50 to 70 percent of monthly income. Rent payments are similar, with neither option presenting a viable option. “Here at Northrim, we are onboarding a new employee who is moving to Fairbanks and one of their first questions is, ‘Where am I going to live?’ It’s something we have to address so it doesn’t impact their career,” Tibbs said.

The shortage of affordable housing can have even more extreme consequences. At a recent grand opening of a low-income housing development in Anchorage, Tibbs spoke with a senior in a wheelchair who had just signed a lease. When asked where she lived before moving into the new unit, she responded, “I was homeless before this.”

From Challenge to Crisis

Housing has been a growing issue for Alaska for years. “We work with many different industries across the state of Alaska. Two of the most consistent issues we hear from our customers, regardless of industry, are labor and housing,” said Jason Criqui, Northrim EVP and Chief Banking Officer.

The problem is due to a combination of factors including rising construction costs, limited availability of building materials and labor, increased financing costs and an aging housing inventory. “As the cost of housing has continued to climb, wage growth has not kept pace,” said Mike Huston, President and CEO of Northrim. “Affordable housing was already a problem, but it became a crisis just within the last two years due to escalating costs and insufficient new construction.”

Understanding Affordable Housing

The term “affordable housing” reflects a shift away from the traditional concept of “low-income housing.” “There’s often an assumption of lower quality housing in less desirable areas. But that’s not true anymore,” Tibbs said. “The vocabulary has changed to ‘affordable housing,’ because it removes the low-income stigma. And ‘affordable’ is actually a better term because it captures a larger segment of the population who need housing support.”

In practical terms, affordable housing is based on a spectrum defined by Area Median Income (AMI), adjusted by family size and geographic location. For example, a family of four in Anchorage earning less than $96,900 annually is considered low income, while a similar family in Fairbanks would be low income at $86,700. These metrics are used to determine eligibility for various housing assistance programs across the state.

The Concept of Workforce Housing

Low income is a spectrum, and the majority of programs and grants that support low-income housing focus on the 30 to 60 percent AMI, leaving a significant gap. “For families who fall in the 60 to 100 percent AMI, there aren’t a whole lot of resources available,” Tibbs said.

Northrim defines “workforce housing” as housing for those within the 60 to 120 percent AMI. “We really need to capture up to 120 percent AMI because, at that income level, they’re actually able to save, they’re able to qualify for a loan. We believe 120 percent is the minimum threshold to be able to say that they’re getting their feet under them,” Tibbs said.

Criqui emphasizes the importance of finding a solution for Alaska’s workforce housing. “Quite often, the workforce employee base makes too much money to qualify for low-income housing projects. That’s where the gap is and where our customers say they are feeling the impact. And that’s what we’re working on with our housing task force to find opportunities to address that,” he said.

Turning a Challenge into an Opportunity

Northrim has long been committed to supporting affordable housing across the state. Over the past decade, the Bank has financed more than 600 affordable housing units for families and seniors. In addition to financing these construction loans, Northrim has invested over $30 million as a tax credit equity partner, providing an additional source of funding needed to make these projects happen.

Recognizing the growing affordable housing crisis has made the Bank even more focused on finding solutions. “Housing is one of the biggest limiting factors to the state’s continued growth. Alaska has a lot of opportunity and making sure we have the workforce and the housing for that workforce is one of the most critical issues we as Alaskans are facing from an economic standpoint,” Huston said.

While this is certainly a challenge, it is also an opportunity, Tibbs noted. “You cannot have a thriving, economically vibrant community without affordable housing. When people have secure, comfortable homes, they’re more confident and willing to invest in their community. This creates an environment where businesses can flourish, entrepreneurs are willing to take risks and jobs are created. Housing and small businesses aren’t just individual necessities—they’re community multipliers that drive economic growth and stability,” he said.

Taking a Leadership Role

The work of Northrim’s newly formed task force, comprised of employees from across the Bank, will set the foundation for sharing solutions to Alaska’s affordable housing crisis.

“We see it impacting the quality of life for our customers and our communities. We felt like the Bank had a leadership role to play in helping to solve the affordable housing crisis,” Huston said of the decision to establish the task force in late 2024.

Firstly, the task force is working to understand the issues. “We’re reaching out to stakeholders—developers, contractors, employers, housing agencies, local government—to find out, what are the specific issues? We need information to establish what we can do to alleviate those problems,” Tibbs said.

Exploring solutions is the next step, whether that’s developing creative new internal financing programs or collaborating with external public/private partners to incentivize workforce housing development. “We know the answer isn’t just one thing or one program or one entity,” Huston said. “It will take everyone working together and chipping away everywhere we can so that we can get more units built.”

Advocacy will also play a role. “We’re looking at what local and legislative priorities can we advocate for to remove barriers to housing and to create more opportunity for housing,” Tibbs said.

Unique and Collaborative Approach

Northrim recognizes that the solutions will be as unique as the communities. “There’s no cookie-cutter approach. What the city of Valdez might need is different than what we are doing in Nome. This is where Northrim’s core values of being flexible and responsive and creating unique solutions really come into play,” said Criqui.

“It’s not something we can do on our own,” he added. “We want to work with housing authorities, state entities and local businesses to fix this issue and Northrim is ready to roll up our sleeves and get started.”

The Importance of Building Trust

Convening, collaborating and building trust are key to making Northrim’s efforts successful. “The biggest thing that we do is build trust with our partners,” Tibbs said.

A recent project completed in Valdez demonstrated the importance of building trust among partners to overcome significant project challenges. Facing high costs and complex logistics, Northrim worked closely with a private developer, the city and the contractor to collaboratively reduce expenses and streamline efforts. Through mutual trust, flexibility and shared commitment—including below-market financing from the Bank, land donated from the city, dedicated resources from the contractor and investments from the developer—the team successfully completed a 28-unit senior housing facility adjacent to the community hospital. This collaboration not only provided seniors with living situations better suited to their needs but also opened existing housing for others, underscoring the critical role trust plays in addressing affordable housing.

Supporting Individuals

In addition to supporting housing development, Northrim is also taking steps to help individuals be able to afford homes. For example, last year, Residential Mortgage, a Bank subsidiary, participated in a special affordable lending program in partnership with the Federal Home Loan Bank of Des Moines to provide 43 borrowers with lower interest rates. On average, the interest rates were reduced by 2 percent for these borrowers.

In another example, in response to the sharp increase in mortgage interest rates, Northrim introduced a seven-year adjustable-rate mortgage (ARM) program to offer lower rates than traditional 30-year mortgages. These and other similar programs are designed to maintain the momentum of home purchases and help Alaskans afford housing.

“We are looking at how we can play a role in the affordable housing crisis resolution, whether it’s from a big-picture perspective working with developers or on an individual level. We have to look at the problem from all sides to make a difference,” Huston said.

The Call to Get Involved

Northrim believes there are several ways to be involved in the affordable housing solution, both from an individual and institutional level. The first step is gaining awareness and understanding of the issue. Second is advocating for solutions, whether it’s property tax abatement or common-sense zoning and building codes. Lastly it is banking with community institutions that are supporting affordable housing projects.

“If you want to see housing projects in your communities, it’s important to put your money in a bank that is actively financing housing in your market. You’re going to earn your interest rate and they’re going to turn around and redeploy those funds back into your community, which can increase the tax base, lower housing costs and create more housing,” Criqui said.

It Comes Down to People

While the affordable housing issue is complex, at the heart is people. “When you are looking at a new employee who is having a hard time focusing on their work because they are struggling to find housing, or you meet a senior experiencing a disability who now has a home because of an affordable housing project—those individual people matter,” Tibbs said.

“We want individuals to have a safe, comfortable place to live. We want opportunities for businesses to start and grow. That’s what drives us to understand this complex issue and search for solutions.”