Treasury Updates Guidance to Help Increase Affordable Housing Supply

Today, the Department of the Treasury announced that it has updated guidance to increase the ability of state, local, and tribal governments to use American Rescue Plan (ARP) funds to address critically needed affordable housing in their states and communities.  We joined with our industry partners to urge the Treasury Department to update its earlier guidance to make clear that State and Local Fiscal Recovery Funds (SLFRF) could be used for long-term loans to LIHTC-financed developments.  Previous guidance effectively precluded SLFRF to be used for affordable housing development.  We are pleased that the Administration worked with our industry and our Hill champions to update its guidance, and we want to especially thank NCSHA for its leadership in the effort.  The updated guidance is very welcome and timely news.

Under the new guidance, funds can be used for loans that are 20 years or longer where the affordability covenant for the units is 20 years or greater.  If these requirements are met, long-term loans would be considered fully expended at the moment of issuance. The updated guidance would allow governments to fully finance long-term affordable homes, including the principal of any such loan, subject to certain conditions.  One such condition would require project sponsors to waive the right to request a qualified contract as a condition for receiving a SLFRF loan.

The updated guidance also expands the range of federal programs considered “presumptively eligible” under the SLFRF program, providing more options for how state and local governments can presumptively use funds for affordable housing.  Treasury also is updating its guidance to clarify that SLFRF may be used to finance the development, repair, or operation of any affordable rental housing unit that provides long-term affordability of 20 years or more to households at or below 65 percent of the local area median income.

In order to further encourage governments to devote available ARP funds to affordable housing, the Treasury Department and the Department of Housing and Urban Development (HUD) will jointly publish a “How-To” Guide to help governments combine ARP funds with other sources of federal funding.  Treasury also plans a series of webinars and briefings for states, local, and tribal governments as well as for nonprofit and private sector entities involved in the development and preservation of affordable housing to provide engagement on how SLFRF can be used to expand housing supply.

This updated guidance will have an immediate impact in allowing state and local governments to fulfill commitments to use ARP funds for affordable housing, and it will help induce additional commitments from other states and local governments as well.  We applaud the attention and action of the Treasury Department.