Treasury to Allow COVID Funds for State, Local Affordable Housing Loans

The U.S. Department of Treasury recently announced that it will allow state, local, and tribal governments more flexibility to use COVID-19 rescue funds to boost the supply of affordable housing, including permission to issue direct long-term project loans. The issued guidance permits State and Local Fiscal Recovery Funds (SLFRF) to fund the full principal amount of long-term affordable housing loans and expands the lost of programs for which the SLFRF can be used for affordable housing.

The changes for the $350 billion SLFRF program are aimed at filling a financing gap for affordable housing projects, allowing them to be more easily developed, especially those that are eligible for the Treasury’s Low-Income Housing Tax Credit.

U.S. Deputy Treasury Secretary Wally Adeyemo said that Treasury is making clear that state and local funds may be used to finance the development, repair, and 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’s median income level.

Treasury had previously called on states and municipalities to use more of their COVID-19 allocations to address a severe shortage of affordable housing, a driver of inflation. Through March 31, over 600 communities had budgeted $12.9 billion from their state and local funding allocations to meet housing needs and lower housing costs, including $4.2 billion for affordable housing development and preservation.