States Use American Rescue Plan Funds to Increase Affordable Housing Supply

By Sarah Brundage, Senior Advisor for Housing Supply & Infrastructure, HUD, and Ellen Lurie Hoffman, Acting Director, Office of Community and Economic Development, Treasury

March 28, 2023

Boosting Supply with State and Local Fiscal Recovery Funds

As part of the Biden-Harris Administration’s efforts to increase access to safe, quality homes, the Department of Housing and Urban Development (HUD) and the Department of the Treasury (Treasury) have been collaborating to encourage the use of American Rescue Plan (ARP) funds for affordable housing production and preservation. The historic potential of these funds can only be unlocked through cooperation between the federal government and strong state, local, and private partners. Treasury Secretary Janet Yellen and HUD Secretary Marcia Fudge recently penned a joint op-ed with a clear call to action: “State, local, and private sector partners must join us by taking advantage of this historic opportunity to make new investments in our nation’s housing supply.”

The State and Local Fiscal Recovery Funds (SLFRF), authorized by the ARP, delivers $350 billion to state, territorial, local, and Tribal governments across the country to support their response to and recovery from the COVID-19 public health emergency. According to Treasury’s latest reporting data, SLFRF recipients have committed over $5.4 billion for affordable housing development and preservation, part of a larger commitment of $16 billion overall in housing-related projects, which also includes rental assistance, mortgage aid, and services for unhoused people.

To further the goal of increasing our nation’s housing supply, Treasury took new steps in July to increase the SLFRF program’s flexibility, allowing the funds to more easily be used for the development, repair, and operation of affordable homes. To further encourage state and local governments to make use of these increased flexibilities, Treasury and HUD jointly published a “How-To” Guide to help governments use SLFRF with other sources of federal funding for affordable housing investment.

Treasury and HUD are encouraged to see states and localities making significant investments to bolster affordable housing development using SLFRF. We have seen hundreds of diverse projects, including building new affordable housing on publicly-owned land, preserving existing affordable housing at risk of conversion to market-rate housing, and converting hotels and unused buildings and schools to affordable housing. In this post, we will elevate three examples of states utilizing these resources to make historic investments to serve their communities’ housing supply needs.

State Examples

Illinois

The Illinois Housing Development Authority (IHDA) is using SLFRF to fill financing gaps in affordable housing projects, in particular Low-Income Housing Tax Credit (LIHTC) developments. One of the challenges of putting together the capital stack for a LIHTC project is the complexity associated with navigating the regulations from the various programs. Because of the flexibility of the SLFRF, funds can be allocated without necessitating significant adjustments to the project that may result in additional costs or delays.

As an example, the Oakwood Shores Phase 3-1 is the development of 51 mixed-income apartments across two sites in the Bronzeville Neighborhood in Chicago. Historically known as the city’s “Black Metropolis,” Bronzeville has a strong sense of pride in its influential history and cultural scene having been the home of Ida Wells, Sam Cooke, and Gwendolyn Brooks to name a few.

This project is the latest phase in the redevelopment of Oakwood Shores, a 100+-acre Chicago Housing Authority (CHA) Plan for Transformation site. Since 2001, The Community Builders, in partnership with the CHA, the City of Chicago, IHDA, HUD, and private investors and lenders, have created 800 mixed-income rental and for-sale units. This phase of Oakwood Shores will consist of one-, two-, and three-bedroom units serving families at market, 60%, and 30% Area Median Incomes.

To make this project possible, IHDA utilized SLFRF funding, 9% LIHTC resources, Illinois Affordable Housing Tax Credits, and other resources from the City, the Chicago Housing Authority, and partners. SLFRF was critical to making this project a reality. With SLFRF, IHDA was able to address a large financing gap caused by construction cost increases and delays resulting from the COVID-19 pandemic.

Nevada

In State of Nevada awarded the Washoe Tribe $5.5 million in SLFRF for a new development to serve low-income families in the Stewart Community who are members of the Washoe Tribe of Nevada and California. According to recent Census Data, almost 32.8% of Stewart’s population lives below the poverty line, more than twice the state’s 12.8% poverty rate. HUD’s Fiscal Year 2023 Indian Housing Block Grant formula allocation needs data reveals that the Washoe Tribe has a housing shortage of at least 507 units, which has led to significant overcrowding issues for these families.

This development was awarded 2022 9% LIHTC. The project will include the new construction of 20 one-story, single family, stick built homes with crawlspaces. The residential units include front porches, back patios, and backyard space for the enjoyment of the tenant families. These usable spaces have been included at the request of Tribal members to best meet the needs and desires of the community. The development also includes a community building which offers a spacious education center, a computer room, common area Wi-Fi, a public kitchen, and on-site education services.

This project is the first phase of two more housing developments planned in the same area for the Washoe people. Without SLFRF and the other federal resources, this critical housing investment for the Washoe Tribe would have continued to be delayed or perhaps never come to fruition.

Massachusetts

The Commonwealth of Massachusetts has dedicated $595 million in SLFRF to housing-related investments. Massachusetts will use these resources to support a wide range of initiatives including down payment assistance, mortgage insurance and interest subsidy programs, affordable homeownership production, rental housing production and preservation, permanent supportive housing production, and public housing rehabilitation and modernization.

One example of Massachusetts’ plans to use SLFRF to expand affordable housing supply is the Mildred Hailey development. Located in the Jamaica Plain neighborhood in Boston, this initiative will combine SLFRF with 4% LIHTC, FHA Risk-Sharing, HUD project-based rental assistance and other state and local resources to preserve and redevelop two affordable properties. When complete, Mildred Hailey will provide 223 new homes for households ranging from 30-100% Area Median Income.

Ongoing Partnership

As Secretaries Fudge and Yellen said, “we now have the chance to address the longer-term affordability challenge that too many families face.” HUD and Treasury will continue to partner to address our nation’s shortage of affordable housing. We applaud state, local, and private partners utilizing the ARP funds to address their communities’ housing needs – and we encourage those who are still considering how to use SLFRF to engage their peers and join us.
 
For more information:
Please visit Treasury’s website for SLFRF.

_{¹The examples included in this post are based on information provided by recipients and their subrecipients, and their inclusion in this document does not constitute an explicit approval of these projects by Treasury.}