Share this article!

The U.S. Department of Housing and Urban Development (HUD) has announced three initiatives focused on affordable housing creation.

HUD has teamed with the U.S. Department of the Treasury on new actions designed to ensure greater interest rate certainty for state and local Housing Finance Agencies (HFAs) that use the Federal Housing Administration’s (FHA) risk sharing initiative with the Federal Financing Bank to finance new construction of affordable housing.

According to HUD, the FHA and the Federal Financing Bank will implement a floor and a cap, called an interest rate “collar,” on the benchmark Treasury rate used to calculate the all-in rate provided to Housing Finance Agencies. This update to the Section 542(c) Housing Finance Agency Risk-Sharing Initiative is designed to make the program easier to use, with the goal of increasing the number of new affordable multifamily properties that can be developed using risk-sharing program financing.

The interest rate collar will be available for Housing Finance Agency-originated mortgages used to finance new construction or substantial rehabilitation of multifamily affordable housing for low-income individuals and families. It will be provided when an application for FHA-insured mortgage financing is conditionally endorsed by FHA. The final pass-through interest rate for the transaction upon completion of construction will be calculated using the floor and cap benchmark Treasury rates referenced above and programmatic spreads determined by the Federal Financing Bank.

“This innovative solution to rate uncertainty will increase the usefulness and reach of a program that has already developed thousands of new rental homes through collaboration among federal, state, and local housing resources,” said Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon in a press statement. “It is one of many levers we’re turning to increase production of affordable rental housing for low-income individuals and families.”

Separately, HUD announced the availability of $100 million in competitive grant funding through its Pathways to Removing Obstacles to Housing (PRO Housing) program. HUD’s Notice of Funding Opportunity is the second round of the PRO Housing competition – earlier this summer, HUD awarded $85 million to communities across 19 states and the District of Columbia. The deadline for applications is Oct. 15.

“The communities who were awarded PRO Housing funding are already doing incredible work to modernize local policies, invest in communities, and build more homes,” said Marion McFadden, Principal Deputy Assistant Secretary for Community Planning and Development. “What makes this program unique is its ability to support and accelerate locally driven planning, implementation, and development efforts. Round two of the competition prioritizes communities with acute need for affordable housing that have already demonstrated a commitment to overcoming local barriers, primarily by having enacted improved laws and regulations.”

HUD also launched a $250 million “Legacy Challenge” for transformative housing investments through the Section 108 Loan Guarantee. The funds can be utilized for adaptive reuse (including commercial-to-residential conversion), the preservation and rehabilitation of existing units, infrastructure to support housing production, manufactured housing, eligible housing uses within mixed-use or transient oriented development projects, and revolving loan pools to support local housing development.

For communities that express interest by Nov. 1, HUD will offer additional repayment flexibilities, up to three years of interest-only payments, and waivers to streamline program requirements.