WASHINGTON — The Biden administration is expanding ways cities and states can use COVID-19 rescue funds to build more affordable housing amid skyrocketing home prices.
New guidance from the Treasury Department Wednesday gives local and state governments greater flexibility to address affordable housing with their share of $350 billion in direct aid from the American Rescue Plan – President Joe Biden’s signature COVID-19 stimulus law that Democrats in Congress passed in March 2021.
What the changes mean
- State and local governments will be able to use American Rescue Plan funds to finance long-term affordable housing loans to nonprofits and developers. The loans must extend at least 20 years and offer affordably priced units for households earning 65% or less of the area’s median income over that same duration. Previously, loans were subject to more restrictions.
- New rules allow cities and states to direct COVID-19 rescue funds to six additional federal housing programs – opening up money for low-income housing credits, affordable housing preservation, supportive housing for the elderly and disabled, and public housing capital funds. Currently, funds are limited to just two programs: the National Housing Trust Fund and HOME Investment Partnerships Program.
- The Biden administration is clarifying that American Rescue Plan funds can “finance the development, repair or operation” of any affordable rental housing unit. Although many cities and states have committed funds toward affordable housing, others have had questions whether they can use the money this way.
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The bigger housing picture
- The U.S. has a shortfall of 1.5 million homes in the housing supply, according to Moody’s Analytics, an economics research firm based in New York. The crunch has helped further fuel a spike in rental and sale prices that has intensified during the pandemic.
- Biden, who faces pressure to find solutions to 40-year high inflation, put forward a goal in May to close the “housing supply gap” in five years.
- In a testament to the housing crisis, more than 600 cities and states have already collectively devoted $12.9 billon in direct aid from the American Rescue Plan to housing. That tops the money spent on public safety, which Biden has repeatedly encouraged cities and states to prioritize. The only more popular use of the funds has been replacing depleted tax revenue to shore up budgets.
More: Where are COVID-19 rescue funds going? The place with pervasive, ‘urgent’ need: Housing
What they are saying
- Wally Adeyemo, deputy treasury secretary, said affordable housing advocates and builders pushed for the changes. “Our goal here is to address the price pressures Americans are facing,” he said, pointing to the administration’s support of legislation to lower prescription drug prices as another step in that effort.
- Stockton Williams, executive director of the National Council of state Housing Agencies, said the existing “quirky language” in the American Rescue Plan law has prevented cities and states from maximizing the funds for affordable housing. He said the new rules will allow COVID-19 rescue funds to work “in tandem” with other funds for housing.
- Gene Sperling, the White House’s American Rescue Plan coordinator and senior adviser to Biden, said the new guidance will “unlock” significantly more financing for affordable housing. Most cities and states have already decided how they’re spending their American Rescue Plan funds. Even so, Sperling said the greater flexibility will offer cities and states focused on affordable housing “a bigger bang for their back.”
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Reach Joey Garrison on Twitter @joeygarrison.