In a speech delivered in Minneapolis, U.S. Secretary of the Treasury Janet L. Yellen announced new funding sources for housing production and urged further action by Congress, states, and localities. This initiative is part of the Biden Administration’s broader effort to reduce housing costs.
Secretary Yellen stated, “Given the scale of the challenge, we must and will continue to do more.” The measures introduced include a new Treasury program administered by the CDFI Fund that will allocate an additional $100 million over three years to support affordable housing financing. Additionally, there will be efforts to provide greater interest rate predictability for state and local housing finance agencies borrowing from the Federal Financing Bank.
Yellen also called on the Federal Home Loan Banks (FHLBs) to increase their spending on housing programs and introduced a new “How-To Guide” to assist state and local governments in utilizing recovery funds provided by Treasury for housing construction. An update to the Capital Magnet Fund was also announced to offer greater flexibility to CDFIs and non-profits financing affordable housing.
These initiatives build on previous announcements made by Deputy Secretary Wally Adeyemo in March. A blog post released today by Treasury emphasized that increasing the nation’s housing supply is crucial for addressing long-term rising housing costs.
The announcement took place at the Family Housing Expansion Project (FHEP) in Minneapolis, which is financed partly by $4 million in State and Local Fiscal Recovery Funds (SLFRF) provided by Treasury. The project includes 84 units serving households earning at or below 30% of the Area Median Income. Secretary Yellen participated in a roundtable discussion with Senator Tina Smith (D-MN) and other housing stakeholders.
During her speech, Secretary Yellen highlighted past efforts during the pandemic that kept Americans housed through programs like Treasury’s Emergency Rental Assistance program and Homeowner Assistance Fund. These programs distributed over $40 billion in assistance nationwide, including more than 12.3 million rental assistance payments.
Treasury has supported new housing construction through tax incentives, fiscal recovery programs, and community lending support. The newly announced efforts aim to bolster these policies further. Secretary Yellen urged Congress to pass bipartisan legislation expanding the Low-Income Housing Tax Credit, part of several legislative proposals from the Biden-Harris Administration intended to build and preserve over 2 million homes.
Through its Emergency Capital Investment Program (ECIP), Treasury invested more than $8.57 billion during the pandemic into community lenders supporting small businesses, consumers, and affordable housing projects. Today’s announcement includes dedicating $100 million over three years from these investments into a new CDFI Fund program focused on increasing affordable housing supply.
Additionally, earlier this year, Treasury extended indefinitely the Federal Financing Bank’s support for HUD’s Affordable Housing Initiative under a risk-sharing program with state and local agencies aimed at reducing borrowing costs for these agencies.
Secretary Yellen called on FHLBs to increase their commitment from 15 percent to at least 20 percent of their net income towards housing programs with an emphasis on new construction.
Treasury also released an updated “Affordable Housing How-To Guide” providing additional guidance for using SLFRF funds for increasing housing supply. In FY 2023 alone, SLFRF recipients budgeted $7.4 billion towards constructing or preserving over 25,000 units as part of broader efforts involving $19 billion allocated for various housing-related projects.
Finally, an update was announced for the Capital Magnet Fund rule aimed at reducing administrative burdens allowing recipients to focus resources on producing and preserving affordable housing units.
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