The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, a part of the American Rescue Plan, delivers $350 billion to state, local, and Tribal governments across the country to support their response to and recovery from the COVID-19 pandemic. Under the program’s final rule, “Development, repair, and operation of affordable housing and services or programs to increase long-term housing security” is a stated eligible use to respond to the negative economic impacts of the pandemic on households and communities.
The Department of Treasury and the Department of Housing & Urban Development have prepared guidance on how to use these funds for affordable housing. The guidance, which can be found in the SLFRF Final Rule, clarifies and expands on various uses of the funds.
SLFRF Affordable Housing Update Summary
Treasury has updated its guidance to clarify two presumptively eligible ways to use SLFRF to fund affordable housing investments under the final rule:
- SLFRF funds used for affordable housing projects under the public health and negative economic impacts (PH-NEI) eligible use category are presumptively eligible if the project meets certain core requirements of the following expanded list of federal housing:
>National Housing Trust Fund
▪ HOME Investment Partnerships Program (HOME)
▪ Low-Income Housing Credit (LIHTC)
▪ Public Housing Capital Fund
▪ Section 202 Supportive Housing for the Elderly Program
▪ Section 811 Supportive Housing for Persons with Disabilities Program
▪ Project-Based Rental Assistance
▪ Multifamily Preservation & Revitalization Program
▪ Affordable housing projects provided by a Tribal government if they would be eligible for funding under the Indian Housing Block Grant program, the Indian Community Development Block Grant program, or the Bureau of Indian Affairs Housing Improvement Program.
There are four core requirements for use of the funds:
- Resident income restrictions;
- The affordability period and related covenant requirements for assisted units;
- Tenant protections; and
- Housing quality standards.
- SLFRF funds used for affordable rental housing under the PH-NEI eligible use category are presumptively eligible uses if the units funded serve households at or below 65% of AMI for a period of 20 years or greater.
Loan Flexibilities
SLFRF can now be used to fund the full principal amount of certain loans that finance long-term affordable housing investments. Among other requirements, the loans must have maturity and affordability covenants of 20 years or longer, including but not limited to loans that fund low-income housing tax credit (LIHTC) projects.
Specifically, under the PH-NEI eligible use category, recipients may use SLFRF funds to make loans to finance affordable housing projects, funding the full principal amount of the loan, if the loan and project meet the following requirements:
- The loan has a term of not less than 20 years;
- The affordable housing project being financed has an affordability period of not less than 20 years after the project or assisted units are available for occupancy after having received the SLFRF investment; and
- To protect affordability, the project owners of any properties receiving SLFRF loans that also receive LIHTC financing must agree to waive their right to request a qualified contract as defined in Section 42(h)(6)(F) of the Internal Revenue Code and repay any loaned funds if the property becomes non-compliant.
Layering SLFRF with Other Funding Opportunities
SLFRF may be combined with a wide range of other federal, state, local, and private resources to meet housing needs. SLFRF may help fill gaps and expedite the construction or rehabilitation of thousands of affordable housing projects around the nation that face funding gaps.
Examples include:
- LIHTC projects: SLFRF may fill funding gaps to projects that received an allocation of 9 or 4 percent LIHTC, for new construction or preservation of affordable rental housing.
- Federal Housing Administration (FHA) multifamily mortgage insurance.
- HOME & Housing Trust Fund.
- HOME-American Rescue Plan.
- Project-Based Vouchers (PBVs).
- Recapitalization of Public Housing through HUD’s Rental Assistance Demonstration (RAD).
- Community Development Block Grants (CDBG) and Section 108 Loan Guarantee Program.
Rehabilitation & Adaptive Use
Recipients may use SLFRF to acquire properties that will be transitioned into affordable housing for households that experienced the negative economic impacts of the pandemic.
Predevelopment
Recipients may use SLFRF to help fund pre-project development activities, which could include site work and land acquisition, that precede housing development or rehabilitation of affordable housing.
This is an excellent potential source of funds for LIHTC projects with gaps to close. Please visit the State and Local Recovery Funds website (https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-funds/recipient-compliance-and-reporting-responsibilities), final rule, final rule overview, final rule FAQs, and Compliance and Reporting Guidance for comprehensive information.