Maryland’s housing agency wants to attach more requirements to financing for affordable housing projects, and developers say the changes could make it more difficult to pull together already complicated deals.

To build or maintain affordable housing in Maryland these days, most projects require the use of the federally backed and state-allocated Low Income Housing Tax Credits.

In Maryland, developers can apply for two such subsidies: One that will help pay for about 50% or 60% of a project’s total cost and another that will cover about 30% or 35% of what’s owed. The credits are awarded on a competitive basis by the Maryland Department of Housing and Community Development each year and have successfully helped produce thousands of building units for people with low incomes.

But now, Maryland’s Department of Housing and Community Development is proposing a rule change that would ask awardees of the two tax credits to make five units or 15% of all units — whichever is larger — available to people experiencing homelessness. In return, the state would pay for rent and social services for those households.

The proposal has roiled the affordable housing development community. Business owners and company representatives said their work, which relies on very thin profit margins, would go bust if Maryland Gov. Wes Moore approves the new language.

“This is a sledgehammer approach to something that needs a scalpel,” said Malik Jordan, the senior vice president for development in Maryland and Tampa Bay for Woda Cooper Companies Inc., a real estate development firm that specializes in affordable housing production and management.

At a virtual hearing hosted by the housing agency Wednesday night, Jordan, based in Baltimore, said the change — however well-intentioned — would inflict “collateral damage” and undue harm “to the individuals the state is seeking to help.”

For example, Jordan and others said, some projects in the process of closing would likely not move forward, resulting in fewer housing units for working people and older adults who can’t afford market-rate homes. Other projects would not get proposed to begin with, they said, spurring affordable housing developers to build elsewhere.

One developer, Jeffrey Paxson of Pax-Edwards LLC, said on Wednesday night that he estimates the state’s costs could grow to as much as $200 million or $250 million a year. “The state is in no position to offer this provision,” he said.

“I’ll be forced to focus on Virginia,” added Adam Stein, co-founder and managing partner of BridgeWater Real Estate, a Maryland-based brokerage company.

In a Thursday statement, representatives from the housing department said they planned to review the public comments made earlier this week.

The state’s economy depends on providing stable housing for all, the statement added, and the pairing of housing with highly individualized social services has been shown to reduce homelessness.

“Solving chronic homelessness requires dedicated executive leadership,” the statement said, “with a clear, public commitment to prioritize homelessness prevention.”

As many as 4,300 Marylanders are what’s known as “chronically homeless,” according to state estimates, which means they live with disabilities and have been unhoused for more than a year.

Meanwhile, some 25,000 people experience homelessness at some point every year. The state approximates that each year for the next decade it needs to secure 500 units of “permanent supportive housing” intended solely for people experiencing chronic homelessness.

In a draft proposal sent out jointly from Moore’s and Maryland housing secretary Jake Day’s offices, the state argued that homelessness costs taxpayers more money and strains hospitals, emergency medical services and public shelters. It asserted that the policy change would reduce taxpayers’ spending on social services and guarantee payment and occupied units to property managers, reducing the burden of having to collect unpaid rent and fill vacancies.

In the event the state couldn’t cover rental assistance or social services at the time of a project’s closing, the units would revert back to regular Low Income Housing Tax Credit units, with preference given to people experiencing homelessness without the social services component.

To make the units available to the population of people without homes, the state would cover the rent costs. The state would also piece together grants or a combination of sources to pay for counseling and social workers, and provide training and technical assistance for property managers who may not have experience working with people who have been unhoused.

But those opposed to the new rule said there are unforeseen costs — such as increased turnover among property managers — that the state hasn’t budgeted for and will fall on property owners.

“I can assure you, it is not as easy as it sounds,” said Scott Copeland, principal of RST Development, a multifamily development firm. “Most frontline staff members are not equipped or trained to address these growing challenges.”

Affordable housing deals are often highly technical and cumbersome, requiring layers of different funding sources and a lot of government support, financial and otherwise.

It also usually requires working with investors who are not just intent on getting their money back, but making a profit.

Opponents to the rule change said bondholders and lenders likely wouldn’t view it favorably. Before making investments, financiers usually want to ensure that a building’s projected occupancy rate can cover its debt service and cash flow. Adding more uncertainty into the equation — such as relying on the state to cover as much as 15% of a building’s expenses, plus those unaccounted-for costs — may cause investors to retreat.

A final version of the rule change could be published by the end of the year. To go into effect, Moore will need to sign off.