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Treasury Announces Coronavirus State and Local Fiscal Recovery Funds Can Be Used for Affordable Housing Development

The U.S. Department of Treasury today released new guidance that allows for Coronavirus State and Local Fiscal Recovery Funds to be used to make long-term loans to affordable housing development, including for Low Income Housing Tax Credit (LIHTC) projects. This action will allow for billions of dollars to be used as a gap filler for thousands of projects across the country that have stalled because of the economic effects of COVID-19. These same effects have been felt by many housing authorities and include supply chain issues, increases in materials used for construction, and labor shortages.

Funds can only be used if housing units are targeted to tenants earning 65 percent of area median income or lower for a minimum of 20 years. Previously, states and localities had been unable to optimize recovery funds for housing financing, dramatically undercutting their effectiveness. State housing finance agencies and members of Congress worked closely with Treasury officials to optimize the uses of recovery funds to support affordable housing construction at a time when it is more needed than ever.

It is critical that state and local decision-makers are made aware of Treasury’s guidance and the flexibility it provides for LIHTC projects.

Treasury’s guidance mirrors provisions of the recently introduced LIFELINE Act, which PHADA has supported and signed onto a letter sent to Congressional leadership seeking their support for the bill. The bipartisan leadership of Senators Leahy (D-VT) and Collins (R-ME) and Representatives Adams (D-NC) and Rouzer (R-NC) was also instrumental in the development of Treasury’s policy. PHADA commends them for their sponsorship of the LIFELINE Act, which led to this significant announcement by the Treasury Department.

“Treasury’s announcement will quickly unlock significant amounts of financing, encourage states and cities to invest additional funds, and establish new sources of long-term capital for affordable construction around the country,” said National Council of State Housing Agencies (NCSHA) Executive Director Stockton Williams. “We are grateful to the Biden-Harris Administration for this significant action in its continuing efforts to address the housing affordability crisis.”

NCSHA’s press release includes the following summary:

Recovery funds can now be used to fund the full principal amount of loans that finance long-term affordable housing investments. To support homeownership, recovery fund recipients can also offer down payment assistance, including contributions to a homeowner’s equity at origination or establishing a post-closing mortgage reserve account.

To take advantage of the new flexibility in the use of recovery funds with the Housing Credit, developments will be required to waive their right to a qualified contract, consistent with the Senate version of the LIFELINE Act.

The guidance further clarifies that repayment of long-term loans can be reinvested into future affordable housing uses consistent with the final rule. Specifically, the rule clarifies that affordable housing loans are considered expended at the point of disbursement to the borrower, and repayment of such loans is not subject to program income rules.

The new Treasury guidance also expands the list of presumptively eligible uses of funds to clarify that affordable housing that meets core requirements of HOME, the National Housing Trust Fund, the Housing Credit, public housing capital funds, Section 202, Section 811, project-based rental assistance, and USDA multifamily preservation are considered eligible uses of recovery funds. The four core requirements include resident income restrictions, affordability, and related covenant requirements, tenant protections, and housing quality standards.

To encourage state and local governments to utilize these increased flexibilities for affordable housing, Treasury and the Department of Housing and Urban Development have jointly published a How-To Guide to provide examples of how these flexibilities can help facilitate affordable housing development using multiple sources of federal funding. Treasury also plans to conduct a series of webinars and briefings with entities involved in the development and preservation of affordable housing to further encourage use of fiscal recovery funds to expand the housing supply.

PHADA Job Opportunity

Senior Housing Policy Analyst

A 1,900 member trade organization based on Capitol Hill, the Public Housing Authorities Directors Association (PHADA), is seeking a senior housing policy staff person to represent membership with Congress and HUD in Washington. Primary functions include analyzing and keeping members informed of housing, other congressional legislation and HUD regulations and advocating the association’s positions on such matters. Detailed knowledge of, and experience with, public and assisted housing programs is essential.


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