The Biden Administration announced it is taking steps to create and preserve nearly 100,000 additional affordable homes for homeowners and renters over the next three years, with an emphasis on the lower and middle segments of the market.

According to a press release on September 1, 2021, the administration says federal agencies will (among other things):

  • Boost the supply of quality, affordable rental units by relaunching the partnership between the Department of Treasury’s (Treasury) Federal Financing Bank and the Department of Housing and Urban Development (HUD) Risk Sharing Program in order to enable eligible state housing finance agencies (HFAs) to provide low-cost capital for affordable housing development; raising Fannie Mae’s and Freddie Mac’s (the Enterprises) equity cap for the Low-Income Housing Tax Credit (LIHTC), the largest federal program for the construction and rehabilitation of affordable rental housing; and making more funding available to Community Development Finance Institutions (CDFIs) and non-profit housing groups for affordable housing production under the Capital Magnet Fund.

Specifically, agencies are announcing that they are:

  • Relaunching the Federal Financing Bank and HUD Risk Sharing Program: To expand the supply of affordable multifamily rental housing, Treasury and HUD have finalized an agreement to restart the Federal Financing Bank’s support of HUD’s Risk Sharing program, which was suspended in 2019. The agreement will provide low-cost Ginnie Mae-comparable rates to HFAs that finance affordable housing development, enabling the development of new quality and affordable housing.
  • Increasing Fannie Mae and Freddie Mac’s Low-Income Housing Tax Credit Investment Cap: LIHTC is the nation’s largest federal program for the construction and rehabilitation of affordable rental housing. Currently, the Enterprises are permitted to invest up to $1 billion per year (or $500 million each) in affordable housing development and preservation supported by these tax credits. This targeted investment further reduces financing costs associated with affordable housing and spurs additional development. Today, FHFA is announcing that it is raising the Enterprises’ LIHTC cap to $1.7 billion (or $850 million each). FHFA is also announcing that it will increase the Duty to Serve (DTS) rural/targeted investment requirement from 40% to 50% of each Enterprise’s total LIHTC investment capacity, or $425 million in targeted investment and $425 million in unrestricted investment. By both raising the caps and targeting the investments at affordable rental housing, today’s actions will support the development and preservation of affordable units in areas most in need.
  • Making Funding Available for Affordable Housing Production Under the Capital Magnet Fund: The Treasury Department is preparing to issue a notice of funding availability for the Capital Magnet Fund (CMF), including changes to strongly encourage affordable housing production. The CMF is a competitive grant program for Community Development Financial Institutions (CDFIs) and non-profit housing groups funded by allocations made each year from Fannie Mae and Freddie Mac. Funds must be used to leverage housing and economic development investments at least ten times the size of the award amount. This year’s historic pool of $383 million in available funding will facilitate the production of affordable housing units throughout the country.