Finding a Way Forward: Tackling Alaska’s Affordable Housing Challenges

By Richard Mantyla and Erich Heinrich, Residential Mortgage

Affordable housing is not just a buzzword, it’s a growing challenge that affects nearly every area of the country. Here in Alaska, the issue is especially urgent. From Anchorage to Fairbanks to the Kenai Peninsula, hardworking Alaskans are finding it more difficult than ever to purchase a home that fits their needs and budget.

While this is a national problem, Alaska faces some unique challenges that make the issue more complex. However, we also have unique opportunities to create meaningful solutions.

The Barriers to Building Affordably

Builders want to meet the demand for affordable housing, but they face significant obstacles. Rising labor costs, material prices and land expenses, along with regulatory hurdles, make it increasingly difficult to build homes at entry-level price points. Zoning restrictions and permitting delays add further time and cost to the process, ultimately increasing the price of new construction for buyers.

In Alaska, these issues are amplified by geography. Materials often need to be shipped over long distances, and unpredictable weather or supply chain delays can add even more cost and complexity.

The Inventory Shortage

At the same time, housing inventory is at historically low levels. A major contributor is the “golden handcuff” effect: many homeowners who secured ultra-low mortgage rates during the pandemic are choosing to stay put, even when they might otherwise sell and move.

Another factor is the rise of accidental landlords. Some homeowners are choosing to keep their current properties as rentals when they move, since rents often exceed their existing mortgage payments. This trend further limits the availability of homes for first-time buyers.

Practical, Proven Solutions

Although there is no one-size-fits-all answer, several solutions are helping Alaskans overcome affordability barriers and achieve homeownership.

One key resource is Alaska Housing Finance Corporation which offers first-time homebuyer programs with below-market interest rates and down payments as low as 3%. These programs lower the upfront cost of buying a home and help more Alaskans get into the market.

Often, it is the challenge of saving up money for a down payment and closing costs that slows down first time buyers. Cook Inlet Lending Center has down payment loans, effectively allowing a borrower to purchase with little or no money out of their own pocket. And, borrowers can pursue a Home$tart Grant- which can supply up to $15,000. These programs can be combined with AHFC and other loan types.

At the national level, Fannie Mae and Freddie Mac also offer affordable mortgage options with 3% down and reduced mortgage insurance.

Another effective strategy is purchasing a multi-family property. Buyers can live in one unit and rent out the others, using rental income to offset the mortgage. This approach can be a smart entry point into both homeownership and real estate investing. Recently, Conventional lenders have lowered the minimum down payment to 5% for two to four-unit properties.

Temporary interest rate buydowns are becoming popular. These allow buyers to reduce their monthly payments during the first one to three years of ownership, easing the transition into a mortgage. If interest rates fall in the future, buyers may have the opportunity to refinance and secure a lower long-term rate.

Smarter Homes, Smarter Designs

Builders are also responding to affordability concerns with smarter design. Many are adopting more efficient floor plans that maximize livable space with less square footage. Thoughtful layouts, energy-efficient systems and modern insulation can reduce both construction and long-term utility costs, making new homes more affordable without sacrificing comfort or quality.

Looking Ahead

There is no single fix for Alaska’s affordable housing challenges, but through a combination of creative financing, practical design and cross-industry collaboration, progress is possible.

At Residential Mortgage, we work every day with Alaskans who are determined to achieve homeownership. Whether it means leveraging state and federal loan programs, exploring innovative property strategies or partnering with local builders, we’re committed to helping our neighbors find a path forward. All loan products offered by Residential Mortgage, LLC and certain loan amounts may not be available in your area and are subject to credit and property approval pursuant to company, agency and investor guidelines.

With thoughtful planning and a shared sense of purpose, we can build a future where more Alaskans can afford to put down roots and call this state home.