Biden-Harris Administration Enhances Program to Build More Affordable Homes

New update to HUD financing program for state and local housing finance agencies will support the construction of new, affordable homes for American families

WASHINGTON – The U.S. Department of Housing and Urban Development and the U.S. Department of the Treasury today announced new actions to provide more interest rate certainty for state and local Housing Finance Agencies (HFAs) that use the Federal Housing Administration’s (FHA) risk sharing initiative with the Federal Financing Bank to finance new construction of affordable housing. Since Day One, the Biden-Harris Administration has been committed to using all available tools to boost the supply of affordable homes and lower housing costs for all Americans. This whole-of-government effort is outlined in today’s White House fact sheet, which highlights HUD’s latest actions to increase the construction of affordable new homes.

HUD Acting Secretary Adrianne Todman will underscore these new announcements and the Biden-Harris Administration’s continued efforts during a press conference today in Milwaukee, WI.

“Let’s face it – we don’t have enough affordable homes. Here at HUD, we are making changes to build new, quality, affordable homes like never before,” said HUD Acting Secretary Adrianne Todman. “Today, alongside our colleagues at the Department of the Treasury, we are announcing a crucial move that will enable our partners to use our financing to build tens of thousands more rental homes for the families we serve.”

FHA and the Federal Financing Bank will implement a floor and a cap, called an interest rate “collar,” on the benchmark Treasury rate used to calculate the all-in rate provided to Housing Finance Agencies.  This update to the Section 542(c) Housing Finance Agency Risk-Sharing Initiative will make it easier to use the program, thereby increasing the number of new, affordable multifamily properties that can be developed using risk-sharing program financing.

“The Biden-Harris Administration knows the key to reversing the affordable housing crunch is to take actions that increase housing supply. The Treasury-HUD rate collar initiative will help reduce the cost to construct more affordable housing that is so urgently needed in neighborhoods across the country,” said U.S. Deputy Secretary of the Treasury Wally Adeyemo. “Treasury will continue to do everything in our power to make housing more affordable for Americans and unlock greater economic prosperity.”

The interest rate collar will be available for Housing Finance Agency-originated mortgages used to finance new construction or substantial rehabilitation of multifamily affordable housing for low-income individuals and families. It will be provided when an application for FHA-insured mortgage financing is conditionally endorsed by FHA. The final pass-through interest rate for the transaction upon completion of construction will be calculated using the floor and cap benchmark Treasury rates referenced above and programmatic spreads determined by the Federal Financing Bank.

“This innovative solution to rate uncertainty will increase the usefulness and reach of a program that has already developed thousands of new rental homes through collaboration among federal, state, and local housing resources,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon. “It is one of many levers we’re turning to increase production of affordable rental housing for low-income individuals and families.”

“We believe this important update to the risk-sharing initiative will not only increase the creation of new, deeply affordable housing for the nation’s low-income families, it will also provide additional flexibility that will make the program usable by more state and local Housing Finance Agencies and their borrowers,” said Deputy Assistant Secretary for Multifamily Housing Programs Ethan Handelman. “This change has long been sought by Housing Finance Agencies, and we’re pleased to add it to the program enhancements we’ve implemented under the Biden-Harris Administration.”

Since the Biden-Harris Administration re-started the Risk Sharing Initiative in 2021, the program has already enabled access to more than $2.7 billion in financing for the development or substantial rehabilitation of more than 16,200 affordable rental homes for low-income families, seniors, and persons with disabilities. In February 2024, FHA and the Federal Financing Bank announced they were indefinitely extending the program’s availability. FHA anticipates that approximately 38,000 additional affordable rental homes will be created or preserved through the initiative over the next ten years alone.

About the Section 542(c) Housing Finance Agency Risk-Sharing Initiative with the Federal Financing Bank

The Section 542(c) Housing Finance Agency Risk-Sharing Initiative allows eligible Housing Finance Agencies (HFAs) to enter into contracts with HUD through which FHA insures multifamily mortgages originated by an HFA that are used to finance construction or rehabilitation of properties with affordable housing units. Under these contracts, HUD and the HFA share the risk of any potential loss resulting from a default of the insured mortgage. With the FHA insurance credit enhancement in place, the Federal Financing Bank will purchase the mortgage, enabling the HFA to recoup their capital and make other investments in their communities.