Billions of unspent pandemic dollars have been made available for housing projects as the federal government steps up efforts to tackle the shortage of affordable homes. The US Treasury announced Tuesday that unused money from State and Local Fiscal Recovery Funds can be deployed for housing projects, freeing up about $40 billion. These funds are eligible for developments that will house families earning 120% the area's median income, a jump from the prior 65% threshold. Otherwise, they can be spent on federal housing programs or federally-supported initiatives to house essential workers.
Meanwhile, leftover funds from the Emergency Rental Assistance program can be rerouted towards low-income housing initiatives, including land acquisition, pre-development, construction, and rehabilitation. The program primarily served to prevent COVID-era evictions. Around $6.9 billion was unused by June 30, 2023.
The Treasury announcement highlighted that while the ERA program has already made more than 12.3 million household payments to keep renting families in their homes, these changes will build out the pipeline to bring additional rental units onto the market. The department also indefinitely extended backstop financing for a risk-sharing program between the Department of Housing and Urban Development and local financing agencies, aiming to lower capital costs for low-risk developments.
Since the pandemic, US housing prices have sharply appreciated as homebuilders try to meet the demand. High mortgage rates have deterred homeowners from selling, reducing the number of existing properties available for sale.
Additionally, the Treasury is examining how climate risks may affect housing stability. Deputy Treasury Secretary Wally Adeyemo outlined in a related blog post that they are working with federal and state regulators to study rising insurance costs and decreasing coverage to understand the impact on housing supply in different regions. Adeyemo noted the lack of granular data on the areas most affected by rising insurance costs and insurers pulling back.
