The U.S. Department of the Treasury on Tuesday announced a series of new initiatives designed to increase the supply of affordable housing across the country.
There are three core provisions of the plan. They include the reallocation of funds originally earmarked for relief from the economic impacts of the COVID-19 pandemic for affordable housing construction, as well as new provisions for the 2021 American Rescue Plan (ARP) Emergency Rental Assistance (ERA) program to clarify the use of such funds for affordable housing.
The third provision is an extension of the support from the Federal Financing Bank (FFB) for “a risk-sharing initiative between the U.S. Department of Housing and Urban Development (HUD) and state and local housing finance agencies,” according to the announcement. HUD previously announced an indefinite extension of the FFB risk-sharing initiative in a move that was both lauded and criticized by housing advocacy groups.
Deputy Secretary of the Treasury Wally Adeyemo authored a blog post that outlines the current situation for affordable housing in the U.S. while contextualizes how the Treasury hopes to impact conditions through the newly announced plan.
The ARP contained state and local fiscal recovery funds that are being updated to “enable states and localities with remaining funds to support a much larger universe of eligible housing projects,” according to Adeyemo. “Recipients will be presumptively eligible to spend funds on housing for families earning up to 120% of area median income, as well as projects that meet the terms of other federal housing programs.”
The Treasury Department will continue to advocate for state and local governments to use these funds to support affordable housing, but it will also seek to “give these jurisdictions the flexibility needed to meet their most pressing housing needs,” he explained. “Those include projects supported by Fannie Mae and Freddie Mac that meet the needs of teachers, firefighters, nurses, and other workers increasingly priced out of certain markets”
The new clarifications for the ERA program are designed to “make clear that qualifying recipients can use their remaining funds for predevelopment and acquisition costs for affordable housing serving very low-income families,” on top of other eligible uses like the construction of affordable housing, Adeyemo said.
The changes announced Tuesday are part of a response to feedback that asked the Treasury Department for more flexibility to support “shovel-ready” projects. Treasury officials urge local governments to “re-evaluate zoning and land use restrictions that too often restrain affordable housing from being built,” Adeyemo wrote, an issue that some local and state governments have acted on in the past.
The FFB risk-sharing initiative will assist in the construction of “tens of thousands of additional affordable homes” over the next decade, he wrote.
Homeowners insurance is also getting attention as Treasury plans to work with “federal and state regulators studying rising insurance costs and decreasing insurance coverage so that we can understand the impact of lack of affordable insurance on housing supply in different parts of the country,” Adeyemo explained.
The Treasury Department also announced that it will hold listening sessions across the country throughout 2024 to better assess actions it can take to improve housing supply and affordability.
