On Tuesday, the Treasury Department released billions of dollars in unspent COVID-19 funds to state and local governments to encourage housing development.
The Biden administration is addressing housing affordability, a major economic concern. Inflation and public unhappiness with President Joe Biden's economic stewardship rise.
The Treasury's greatest modification permitted state and local governments to use unspent $350 billion State and Local Fiscal Recovery Fund funds to help housing projects for families earning up to 120% of the area's median income, up from 65%.
These funds can be utilized on projects that meet the standards of one of a dozen or more government housing programs, including Fannie Mae and Freddie Mac programs for teachers, firefighters, and nurses. This will aid several housing projects.
Reuters expects $40 billion in funding for such projects. States and the largest cities and counties received most of the $350 billion in state and local funding, but Treasury anticipated 12% was unbudgeted as of Sept. 30, 2023. The 2021 American Rescue Plan Act restricted state and municipal fiscal recovery funds to contracts or other binding expenditures by 2024 and full consumption by 2026. The rest goes to Congress for redeployment.
Treasury also indicated that municipalities holding unspent COVID-19 Emergency Rental Assistance Program money can utilize them for "pre-development" and land acquisition for low-income affordable housing projects, as well as building and rehabilitation. The original $46 billion rental assistance program started by Trump and expanded by Biden to combat pandemic homelessness had $6.9 billion left as of June 30, 2023.
Property analysts predict low-interest homeowners to stay put, raising prices. High borrowing rates and resource limitations hinder house supply expansion. "The lack of supply is helping to drive up housing costs for American families," said Deputy Treasury Secretary Wally Adeyemo. Initiatives would "modest but important impact on housing supply."
The Treasury extended the Federal Financing Bank's HUD-local housing agency risk-sharing assistance indefinitely. The initiative resumed in 2021, building and renovating 42,000 low-income rental units with $5 billion. Adeyemo expected the extension to add tens of thousands of units over a decade. Federal Financing Bank finances federal agency borrowing and lending.
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