The U.S. Department of the Treasury announced new guidance (July 27, 2022) to increase the ability of state, local, and tribal governments to use U.S. bailout (ARP) funds to boost the supply of affordable housing in their communities . The step follows a commitment in the administration’s recently released Housing Supply Action Plan to leverage U.S. bailout funds for affordable housing investments as part of a strategy aimed at increasing the country’s housing supply and reducing housing costs over time.
The Treasury has previously encouraged governments to direct some of the $350 billion available to them through the State and Local Fiscal Recovery Fund (SLFRF) to develop, repair and operate housing. affordable. New Treasury data shows that these efforts have yielded strong results: through March 31, 2022, more than 600 state and local governments had earmarked $12.9 billion in SLFRF funds to meet housing needs and reduce housing-related costs, including $4.2 billion for affordable housing development and preservation. The updates build on that progress and should help local governments fulfill and expand on those commitments to boost the nation’s supply of affordable housing and reduce costs for the American people over time.
“Increasing the country’s housing supply is key to reducing long-term housing costs,” said Under Secretary of the Treasury Wally Adeyemo. “Treasury continues to strongly encourage state and local governments to direct a portion of the historic funding available under President Biden’s U.S. bailout to build and rehabilitate affordable housing in their communities and the actions announced today will allow them to do so even more easily. .”
In January 2022, the Treasury issued a final rule for the SLFRF aimed at providing great flexibility for the use of the funds, including for affordable housing uses which the Department has strongly encouraged. Guidance released by the Treasury today includes two additional steps: (1) increasing the flexibility of using the SLFRF to fully fund long-term affordable housing loans and (2) expanding deemed eligible uses of affordable housing to to further maximize the availability of SLFRF funds for affordable housing. These updates were informed by consultations and partnership with housing advocates and members of Congress, including those who co-sponsored the LIFELINE Act, a bipartisan, bicameral bill designed to provide additional flexibilities to existing guidelines. that the Treasury had published to encourage the use of the SLFRF for affordable housing.
- Increase the flexibility to use the SLFRF to finance long-term loans for affordable housing. The Treasury is updating guidance to allow the SLFRF to be used more easily to fund long-term affordable housing loans, a common form of affordable housing finance. The SLFRF authorizes the funds to be used, among other things, to address the public health and negative economic effects of the pandemic, including by building affordable housing. The Treasury engaged with members of Congress, local leaders and affordable housing developers on how to further increase clarity and flexibility regarding the use of the SLFRF for affordable housing. The updated guidelines allow governments to use SLFRF funds to fully fund long-term loans for affordable housing, including the principal of those loans, subject to certain conditions. These changes will facilitate significant additional funding for affordable housing projects, including those that would qualify for additional assistance under the Treasury’s Low Income Housing Credit (LIHTC).
- Expand deemed allowable uses. The Treasury’s final rule was originally designed to allow flexibility in the use of affordable housing funds, identifying uses consistent with two major HUD programs as presumed eligible under the SLFRF. Today’s guidelines expand that list to include an expanded range of federal programs from multiple agencies, allowing more options for how states and local governments can use affordable housing funds. These changes are intended to build on Treasury’s efforts to facilitate the use of the SLFRF to leverage other sources of federal affordable housing funding. In addition, Treasury is updating guidance to clarify that SLFRF funds can be used to finance the development, repair or operation of any affordable rental housing that provides long-term affordability of 20 years or more to households. at or below 65% of the local area median income.
To further encourage state and local governments to make use of these increased flexibilities, the Treasury and the Department of Housing and Urban Development are also jointly releasing a “How To” guide to help governments easily combine bailout funds. US with other federal funding sources. . The how-to guide provides examples of how these flexibilities can help facilitate affordable housing transactions using multiple sources of federal funding by combining eligibility to use the SLFRF with existing sources of federal funding. Over the coming months, Treasury will be hosting a series of webinars and information sessions with states, local governments, and nonprofit and private sector entities involved in the development and preservation of affordable housing to provide a continued commitment to how SLFRF funds can be used to expand the housing supply.
These updates are the latest step in an administration-wide effort to reduce housing costs and increase housing supply. In May, President Biden released the administration’s housing supply action plan, which aims to increase housing supply, including by closing funding gaps for affordable housing, helping communities reforming zoning and land use policies to increase housing production and deploying additional federal resources and regulations. tools to increase housing supply and lower long-term housing costs. Updates to Treasury guidelines are part of this wide range of initiatives aimed at increasing investment in affordable housing and reducing costs for American families. As part of its implementation of the bailout plan for Americans, the Treasury is also implementing additional programs to reduce housing costs, including the Emergency Rental Assistance Program, which has provided millions of Americans support to prevent evictions, and the Homeowners Assistance Fund, which provides nearly $10 billion in support to landlords to prevent foreclosures.