An update from Treasury increases flexibilities for local governments looking to invest in affordable housing production and preservation.
The U.S. Treasury released updated guidance Wednesday to increase the ability of local and state governments to utilize American Rescue Plan (ARP) funds towards affordable housing projects and initiatives. The full press release can be read here.
Already an eligible expense of ARP’s State and Local Fiscal Relief Fund (SLFRF), this update goes further in assisting and encouraging local governments to increase the housing supply. The new guidance provides the following clarifications:
1. Increased Flexibility to Use SLFRF to Fund Long-Term Affordable Housing Loans.
Treasury is updating guidance to permit SLFRF to more easily be used to finance long-term affordable housing loans, a common form of affordable housing finance. SLFRF permits funds to be used, among other uses, to combat the public health and negative economic effects of the pandemic, including by building affordable housing. Treasury has engaged with members of Congress, local leaders, and affordable housing developers on how to further increase clarity and flexibility around using SLFRF for affordable housing. The guidance updates permit governments to use SLFRF funds to fully finance long-term affordable housing loans, including the principal of any such loans, subject to certain conditions. These changes will facilitate significant additional financing for affordable housing projects, including those that would be eligible for additional assistance under Treasury’s Low Income Housing Credit (LIHTC).
2. Expanded Presumptively Eligible Uses
Treasury’s Final Rule was initially designed to allow for flexibility in the use of funds for affordable housing, identifying uses consistent with two major HUD programs as presumptively eligible under SLFRF. Today’s guidance expands that list to include an expanded range of federal programs from multiple agencies, permitting more options for how states and local governments can presumptively use funds for affordable housing.
This update provides guidance to clarify two presumptively eligible ways to use SLFRF to fund affordable housing investments:
a) SLFRF funds used for affordable housing projects are presumptively eligible uses if the project meets certain core requirements of federal housing programs (listed in full here). The requirements are: Resident income restrictions; the affordability period and related covenant requirements for assisted units; tenant protections; and housing quality standards.
b) SLFRF funds used for affordable rental housing are presumptively eligible uses if the units funded serve households at or below 65% of AMI for a period of 20 years or greater.
Affordable housing remains a top priority of communities when investing their ARP funds. According to Treasury, 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.
How To Invest
To assist state and local governments in considering the eligibility of potential affordable housing projects, Treasury has published Affordable Housing How-To Guide: How to Use State and Local Fiscal Recovery Funds for Affordable Housing Production and Preservation.
Flowchart included in Treasury's How-To Guide
That document can be read in full here, and at the link below.