The Biden administration, through the U.S. Department of the Treasury, announced the launch of multiple initiatives on Monday to increase funding sources for housing production. The announcement comes as high mortgage rates and a lack of supply have created affordability challenges.
In a speech in Minneapolis, Treasury Secretary Janet Yellen will announce the new funding sources for housing production. She will also urge further action by states and Congress, including the passage of bipartisan legislation to expand the Low-Income Housing Tax Credit (LIHTC) program. The Biden administration estimates that the bill would collectively build and preserve over 2 million homes.
“There will not be a quick fix to the long-term rise in housing costs. But the Federal and state and local governments play an important role in ensuring that all Americans have affordable and safe homes,” the Treasury wrote in a blog post. “The actions taken now are an important start, and the Administration is prioritizing laying the groundwork for larger legislative action when Congress is ready to act.”
The Treasury is allocating $100 million by 2027 to finance affordable housing in a new program administered by the Community Development Financial Institutions (CDFI) Fund. The resources are the return from investments made by the fund during the COVID-19 pandemic to help community lenders support small businesses, consumers and affordable housing projects.
Another initiative includes providing greater interest rate predictability to state and local housing finance agencies that borrow from the Federal Financing Bank (FFB) to support new housing development. If implemented, the initiative would lead to thousands of additional housing units in the coming years, Treasury said.
The Treasury also calls on the 11 Federal Home Loan Banks (FHLBs) to increase their support for housing programs that are focused on new construction to 20% of their net income. By law, they are required to devote at least 10%. Voluntarily, the FHLBs have already increased their commitment to 15%.
According to the Treasury estimates, if the 20% level “had been in place over the past five years, the FHLBs would have contributed nearly $2 billion more to housing programs than was required by law.”
Yellen’s announcement includes a new “how-to guide” for state and local governments using Treasury recovery funds to construct housing, as well as an update to the Capital Magnet Fund that allows flexibility to CDFIs and nonprofits that finance affordable housing.
