Treasury Announces New Steps to Increase Affordable Housing Supply
The U.S. Treasury Department recently announced new guidance to increase the ability of state, local, and tribal governments to use American Rescue Plan (ARP) funds to boost the supply of affordable housing in their communities.
The context: The updated Treasury guidance follows a commitment in the Biden administration’s Housing Supply Action Plan to leverage American Rescue Plan funds for investments in affordable housing as part of a broader effort to increase the nation’s housing supply and lower housing costs.
Treasury has previously encouraged governments to dedicate a portion of the $350 billion available to them under the State and Local Fiscal Recovery Funds (SLFRF) toward the development, repair, and operation of affordable housing units. Treasury data shows that through March 31, 2022, over 600 state and local governments had budgeted $12.9 billion in SLFRF funds to meet housing needs and lower housing-related costs, including $4.2 billion for affordable housing development and preservation.
One level deeper: Treasury’s updated guidance increases flexibility to use SLFRF to fund long-term affordable housing loans. The guidance will facilitate significant additional financing for affordable housing projects, including those that would be eligible for additional assistance under Treasury’s LIHTC program.
Governments can now use SLFRF to fully finance long-term affordable housing loans, including the principal of such loans, subject to certain requirements. The loans must have maturity and affordability requirements of 20 years or longer and must fund units serving tenants with income less than or equal to 65 percent of AMI. Additionally, the project owner must repay any loaned funds if the property becomes noncompliant, and in the context of a LIHTC project must waive the right to request a qualified contract. The guidance clarifies that repayment of long-term loans can be reinvested into future affordable housing uses.