Today, the Treasury Department announced new guidance to increase state, local, and tribal governments’ ability to use Coronavirus State and Local Fiscal Recovery Funds (SLFRF) authorized in the American Rescue Plan Act (ARPA) to support affordable housing development, including through the Housing Credit. The guidance aims to provide additional flexibilities for the use of SLFRF – $350 billion provided to all levels of state and local government – to Treasury’s January 2022 final rule for SLFRF. In addition to the new guidance, Treasury and HUD also released a “How-To Guide” to encourage state and local governments to utilize these increased flexibilities for additional affordable housing development.
Although affordable housing was made an eligible use of SLFRF in the January final rule, its structure made it difficult, and often impossible, to use the funds for Housing Credit development. The previous guidance allowed the use of SLFRF to finance the “cost of the loan” but not the full principal amount, forcing state and local governments to find other resources. The new guidance, effective immediately, allows states and localities to use SLFRF to make long-term loans to affordable housing developments, as long as the units are targeted to tenants earning 65 percent of area median income or lower, for a minimum of 20 years. In addition, to take advantage of this new flexibility with the Housing Credit, developments are required to waive their right to a qualified contract.
ACTION and our partners, under the leadership of ACTION Co-Chair NCSHA, have been working closely with Treasury and Members of Congress to optimize the use of SLFRF to support affordable housing construction over the past several months. Earlier this year, Senators Pat Leahy (D-VT) and Susan Collins (R-ME) and Representatives Alma Adams (D-NC) and David Rouzer (R-NC) introduced the LIHTC Financing Enabling Long-term Investment in Neighborhood Excellence Act, or LIFELINE Act, to allow SLFRF to make long-term loans to Housing Credit developments. This legislation was instrumental in developing Treasury’s new guidance to facilitate long-term affordable housing assistance.
The announcement from Treasury comes at a critical time with rising inflation, increased construction costs, and lagging incomes making it increasingly difficult to address the shortage of affordable housing in urban, suburban, and rural communities nationwide. ACTION commends the Administration and Congress for their work to adopt these guidance changes and deliver on their commitment from their Housing Supply Action Plan to explore ways to unlock more resources for affordable housing through both legislation and regulatory efforts.
This announcement from Treasury will result in a meaningful boost in resources to pair with the Housing Credit, filling financing gaps for affordable rental housing development. We must also continue our efforts to advance the Affordable Housing Credit Improvement Act to strengthen and expand the Housing Credit by increasing cosponsorship. Check out ACTION’s advocacy resources to assist with outreach to your Members of Congress.
Learn more about Treasury’s new guidance in a blogpost from ACTION Co-Chair NCSHA, here.