Affordable Housing How-To Guide — How to Use State and Local Fiscal Recovery Funds, U.S. Department of the Treasury
Summary
U.S. Department of the Treasury Affordable Housing How-To Guide, How to Use State and Local Fiscal Recovery Funds for Affordable Housing Production and Preservation, updated June 2024, prepared with the Department of Housing and Urban Development and the Department of Agriculture. It says the SLFRF program, part of the American Rescue Plan, delivers $350 billion to state, local and Tribal governments, and summarizes guidance in Final Rule FAQs 2.14 and 4.9 updated in March 2024. The guide describes expanded presumptive eligibility for affordable housing investments, including units limited to households at or below 120% area median income for at least 20 years, and loan flexibilities allowing funds for the full principal of certain long-term affordable housing loans. These are Treasury's own guidance statements.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- Congressional materials
- Document type
- Department Of The Treasury Updated Affordable Housing How To Guide Home Treasury Gov Syste
- Case
- Department Of The Treasury Updated Affordable Housing How To Guide Home Treasury Gov System Files 13 4B5485Ebef
Cite this document
“Affordable Housing How-To Guide — How to Use State and Local Fiscal Recovery Funds, U.S. Department of the Treasury.”
Original at home.treasury.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/department-of-the-treasury-updated-affordable-housing-how-to-guide-home-treasury-gov-system-files-13-4b5485ebef/
, SHA-256 2507295a10c860541bad9718b640e126d402afe0db768fc82228b4679358dbcd.Full text
U.S. DEPARTMENT OF THE TREASURY
AFFORDABLE HOUSING
HOW-TO GUIDE
How to Use State and Local Fiscal Recovery Funds
for Affordable Housing Production and Preservation
In partnership with the U.S. Department of Housing
and Urban Development and the U.S. Department of Agriculture
Updated June 2024
The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, a part of the American Rescue Plan, delivers $350 billion
to state, local, and Tribal governments across the country to support their response to and recovery from the COVID-19 pandemic.
Recipient governments have a once in a generation opportunity to invest these SLFRF dollars to boost the supply of affordable
housing. Under the program’s final rule, “Development, repair, and operation of affordable housing and services or programs to
increase long-term housing security” is an enumerated eligible use to respond to the negative economic impacts of the pandemic on
households and communities.
To assist recipients in implementing these funds for affordable housing, the Department of the Treasury, the Department of Housing
and Urban Development, and the U.S. Department of Agriculture have prepared this guide, which provides a summary of updated
guidance related to SLFRF recipients’ ability to use SLFRF funds to invest in affordable housing. The guidance, which can be found
in Final Rule FAQs 2.14 and 4.9, was updated in March 2024 and clarifies and expands on the framework in the SLFRF final rule. This
“how-to” guide provides examples of how recipients can combine and “layer” SLFRF with other sources of funding to maximize
resources and meet housing needs.
SLFRE Affordable Housing Updates at a Glance:
+ Expanded Presumptive Eligibility. SLFRF permits funds to be used, among other uses, to combat the public health and
negative economic impacts (PH-NEI) of the pandemic. Treasury’s guidance clarifies two presumptively eligible ways to use
SLFRF to fund affordable housing investments under the final rule.*
* Option 1: SLFRF funds used for affordable housing projects under the PH-NEI eligible use category are presumptively
eligible if the project meets certain core requirements of an expanded list of federal housing programs.” See the box
below for further details.
* Option 2: SLFRF funds used for the development, repair, or operation of any affordable rental housing unit that has
a limited maximum income of 120% area median income (AMI), as imposed through a covenant, land use restriction
agreement, or other enforceable legal requirement for a period of at least 20 years. A jurisdiction may establish a
longer period of affordability at its discretion.
Under this option, recipients may use SLFRF funds as part of the financing for a mixed-income housing project if
the total financing made up of SLFRF funds does not exceed the total development costs attributable to affordable
housing units limited to households at or below 120% AMI for the affordability period. For example, if 25% of a
project’s units are reserved for families at or below 120% AMI for the affordability period, and 20% of the total
development costs of the project are attributable to such reserved units, then SLFRF funds may be used to pay for up
to 20% of the total development costs.
* Loan Flexibilities. SLFRF can be used to fund the full principal amount of certain loans that finance long-term affordable
housing investments. Among other requirements, the loans must have maturity and affordability covenants of 20 years or
longer, including but not limited to loans that fund low-income housing tax credit (LIHTC) projects.*
1 Refer to Final Rule FAQs 2.14 and 4.9 for additional information about presumptively eligible affordable housing investments and other program requirements.
2 Ifarecipient chooses to use SLFRF funds in alignment with these federal housing programs, it must require the covered project or units to adhere to all applicable
local codes, and comply, at a minimum, with the applicable federal housing program’s requirements related to the following (to the extent the applicable federal
housing program has such requirements): resident income restrictions; the affordability period and related covenant requirements for assisted units; tenant
protections; and housing quality standards.
3 Refer to Final Rule FAQ 4.9 for additional information and requirements for using SLFRF to fund affordable housing loans.
AFFORDABLE HOUSING HOW-TO GUIDE | 1
Eligible Federal Housing Programs for Option 1
• The Housing Trust Fund (HTF, administered by HUD);
• The HOME Investment Partnerships Program (HOME, administered by HUD);
• The Low-Income Housing Tax Credit (administered by Treasury);
• The Public Housing Capital Fund (administered by HUD);
• Section 202 Supportive Housing for the Elderly Program and Section 811 Supportive Housing for Persons with
Disabilities Program (administered by HUD);
• Project-Based Rental Assistance (PBRA, administered by HUD);
• Multifamily Preservation & Revitalization program (administered by USDA);
• Affordable housing projects provided by a Tribal government if they would be eligible for funding under
the Indian Housing Block Grant program, the Indian Community Development Block Grant program, or the
Bureau of Indian Affairs Housing Improvement Program;
• [NEW] Project Based Vouchers (PBVs, administrated by HUD);
• [NEW] Choice Neighborhoods (administered by HUD) (only if the funds are used for the development of
affordable housing as defined for purposes of the Choice Neighborhoods program);
• [NEW] Section 514/516 Farm Labor Housing Direct Loans and Grants (administered by USDA);
• [NEW] Section 515 Multifamily Housing Direct Loans (administered by USDA); and
• [NEW] Section 538 Multifamily Housing Loan Guarantees (administered by USDA).
Second, Treasury will presume that financial assistance to a household benefiting from a loan guarantee under the
following federal housing program, that is intended to supplement that federal housing program, is an eligible use
of SLFRF funds as a response to the negative economic impacts of the pandemic:
• [NEW] Section 502 Single Family Housing Guaranteed Loans (administered by USDA).
Third, Treasury will presume that any affordable housing project that is participating or approved to participate in
the following federal housing programs is an eligible use of SLFRF funds as a response to the negative economic
impacts of the pandemic:
• [NEW] Projects financed under the Section 108 Loan Guarantee Program (administered by HUD).
Fourth, Treasury will presume that financial support for an affordable housing project that is or will be financed
with a loan that is purchased by Fannie Mae or Freddie Mac (each, a GSE) is an eligible use of SLFRF funds as a
response to the negative economic impacts of the pandemic to the extent that the loan purchased by Fannie
Mae or Freddie Mac is:
• [NEW] considered by the GSE to be fully or partially “mission driven” under FHFA’s definition of “Loans on
targeted affordable housing properties,” in Appendix A: Multifamily Definitions of the 2024 Scorecard for
Fannie Mae and Freddie Mac
• [NEW] purchased under Fannie Mae’s Sponsor-Dedicated Workforce Housing Program, Fannie Mae’s Sponsor-
Initiated Affordability Program, Freddie Mac’s Workforce Housing Preservation Program, or otherwise
considered by the GSE to be fully or partially “mission driven” under FHFA’s definition of “Loans to preserve
affordability at workforce housing properties,” in Appendix A: Multifamily Definitions of the 2024 Scorecard for
Fannie Mae and Freddie Mac
AFFORDABLE HOUSING HOW-TO GUIDE I 2
Is the use aligned to the core requirements
of a specified federal program?
Presumptively Yes If the use is otherwise
related and reasonably
Eligible proportional to addressing
No No
the negative economic
and follows the
Yes requirements of the Final
Is the use funding units at or below 120% Rule, it is still eligible.
If funded by a loan, do the loan and Not funded
by a loan
20-year+ maturity/covenant?
Loan May Not be Project May be
Fully Funded No Yes Fully Funded
with SLFRF with SLFRF
Additional Uses
• A broader range of affordable housing investments may also be eligible uses of SLFRF funds under the final rule if they are
related and are reasonably proportional to addressing the negative economic impacts of the pandemic and otherwise
meet the final rule’s requirements. Depending on the needs of the local rental market, it may be reasonably proportional
to address the negative economic impacts of the pandemic by funding units even above 120% AMI that do not fall into the
presumptively eligible categories listed above.
• Recipients may consider offering down payment assistance. Examples of this assistance include:
• contributions to a homeowner’s equity at origination; or
• establishing a post-closing mortgage reserve account on behalf of the borrower that may be utilized to make a missed or
partial mortgage payment at any point during the life of the loan (e.g., if the borrower faces financial stress).
• Homeownership assistance that would be eligible under the Community Development Block Grant (at 24 CFR 507.201(n)) is
also an eligible use of SLFRF funds.
• Recipients may offer support to any rural household which received a guaranteed loan under the USDA’s Section 502
Guaranteed Loan Program, including direct cash transfers, to enable that household to pay for housing costs.
AFFORDABLE HOUSING HOW-TO GUIDE I 3
Flexibilities and Requirements for Long-Term Loans for Affordable Housing:
Treasury has concluded that the features of certain long-term loans significantly mitigate concerns about funds being deployed
for purposes of recycling funds, potentially for ineligible uses, following the SLFRF program’s expenditure deadline. Treasury has
determined that SLFRF funds may be used to finance certain loans that support affordable housing investments. Specifically, under
the PH-NEI eligible use category, recipients may use SLFRF funds to make loans to finance affordable housing projects, funding the
full principal amount of the loan, if the loan and project meet the following requirements:
1. The loan has a term of not less than 20 years;
2. The affordable housing project being financed has an affordability period of not less than 20 years after the project or
assisted units are available for occupancy after having received the SLFRF investment; and
3. To protect affordability, the project owners of any properties receiving SLFRF loans which also receive LIHTC financing must
agree to waive their right to request a qualified contract as defined in Section 42(h)(6)(F) of the Internal Revenue Code and
repay any loaned funds if the property becomes noncompliant.
Loans that fund investments in affordable housing projects under the PH-NEI eligible use category which meet the above criteria
will be considered to be expended at the point of disbursement to the borrower, and repayments on such loans are not subject to
program income rules. Loan modifications will be permitted if the modifications do not result in repayment of all or substantially
all funds to the lender prior to the end of the affordability period. To reduce administrative complexity, the start date of the 20-year
affordability covenant may conform to the start date of other covenants on the same project or units that are required by another
source of federal or state funding associated with the project or units.
Layering SLFRF with Other Funding Opportunities
SLFRF may be combined with a wide range of other federal, state, local, and private resources to meet housing needs. The rest of
this guide provides an overview of possible combinations and uses of resources. Recipients using SLFRF in conjunction with another
federal program must comply with all related statutory and regulatory requirements and policies of both programs, including the
capital expenditure requirements and the requirement that if a project is only partially funded with SLFRF, the portion of the project
funded must be an eligible use under the SLFRF program.4
1. Flexible funding for new construction and substantial rehabilitation of affordable housing
SLFRF may help fill gaps and expedite the construction or rehabilitation of thousands of affordable housing projects around the
nation that face funding gaps, in many cases due to the impacts of COVID-19 and the resulting economic challenges on materials and
labor costs. Recipients also could use these funds to support “shovel ready” projects that have received other funding approvals from
federal, state, local government, or private sources. Examples include:
• LIHTC projects: SLFRF may fill funding gaps to projects that received an allocation of 9 or 4 percent LIHTC, for new
construction or preservation of affordable rental housing.
4 For more information about capital expenditure requirements, refer to the final rule and pages 30-31 of the Overview of the Final Rule. For more information about
blending and braiding SLFRF funds, refer to Final Rule FAQ 4.8.
AFFORDABLE HOUSING HOW-TO GUIDE I 4
• Federal Housing Administration (FHA) multifamily mortgage insurance: HUD’s Office of Multifamily Housing insures new
construction and substantial rehabilitation loans for the construction or substantial rehabilitation of rental or cooperative
housing under section 221(d)(4) of the National Housing Act. These loans are often not sufficient to cover the entire cost
of these transactions, and SLFRF could provide necessary additional financing to make the projects financially viable. The
221(d)(4) program includes key goals and requirements related to federal wage rates and environmental reviews.
• HOME and HTF: The HOME program, through which funds are provided to state and local governments designated
as Participating Jurisdictions (PJs), and HTF, which provides formula funds to states, may be used for acquisition,
rehabilitation, and new construction of affordable homeownership or rental housing. Recipients may align SLFRF with these
HUD programs to meet affordable housing production and repair goals.
• HOME-ARP: The American Rescue Plan provided funding to PJs to assist qualifying populations. SLFRF may be layered with
HOME-ARP to acquire, rehabilitate, or newly construct rental housing for eligible populations.
• Project-Based Vouchers (PBVs): Recipients may partner with their local Public Housing Authorities (PHAs), which may be able
to award PBVs to support construction or rehabilitation of units pursuant to section 8(o)(13) of the U.S. Housing Act of 1937.
• Recapitalization of Public Housing through HUD’s Rental Assistance Demonstration (RAD): Many PHAs are undertaking
substantial rehabilitation of public housing or repositioning public housing and adding new homes under RAD. SLFRF may
fill gaps in these RAD transactions or may be used as a flexible source to support Faircloth-to-RAD housing transactions,
which allow PHAs to add new affordable housing.
• Community Development Block Grants (CDBG) and Section 108 Loan Guarantee Program: SLFRF may be combined
with CDBG funding that states, metropolitan cities, and urban counties receive annually to support rehabilitation,
conversion, or reconstruction projects. Recipients may align SLFRF with CDBG or Section 108 Loan Guarantee Program
financing to make eligible affordable housing investments.
• Rural Housing: SLFRF funds may be combined with loans under USDA’s Section 515 Multifamily Housing Direct Loan
Program to construct affordable multifamily rental housing for households with very low, low or moderate incomes
in eligible rural areas. Funds may also be provided to develop affordable rental housing in rural areas for any project
benefitting from a loan guarantee under USDA’s Section 538 Multifamily Housing Loan Guaranteed Program.
• Workforce Housing: SLFRF funds may be used to preserve affordable workforce housing units. Funds may be used in
the capital stack of any project that is partially financed by a loan purchased by Fannie Mae under its Sponsor-Dedicated
Workforce Housing Program or Sponsor-Initiated Affordability Program, or purchased by Freddie Mac under its Workforce
Housing Preservation Program.
• Choice Neighborhoods Program: The Choice Neighborhoods (CN) Program provides funding to cities, public housing
authorities and tribes to redevelopment severely distressed HUD public housing and other HUD-assisted housing projects
which are located in low-income neighborhoods. SLFRF funds could supplement a Choice Neighborhood Implementation
Grant to replace severely distressed public housing and provide housing that decreases the concentration of very-low
income families.
AFFORDABLE HOUSING HOW-TO GUIDE I 5
• Supportive Housing: SLFRF funds could support projects receiving capital advances to finance the development of
supportive housing for very low-income elderly persons under HUD’s Section 202 program. SLFRF funds could also support
projects receiving capital advances to finance supportive rental housing for persons with disabilities or provide project
rental assistance under HUD’s Section 811 programs.
2. Rehabilitation and Adaptive Reuse
Recipients may use SLFRF to acquire properties that will be transitioned into affordable housing for households that experienced the
negative economic impacts of the pandemic. This could include acquisition of market rate rental properties, motels, or commercial
properties that will be converted to affordable housing, or acquisition and preservation of publicly supported affordable housing.
SLFRF may finance retrofits and weatherization of properties to improve energy efficiency, potentially by leveraging new federal
funding such as the Department of Energy’s Weatherization Assistance Program, or infrastructure resources.
Opportunities for layering with FHA Multifamily mortgage insurance include:
• HUD’s Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Rental Housing under Section 223(f) of
the National Housing Act: FHA insures loans that offer fixed-rate, non-recourse financing for up to 35 years and allow for a
modest number of repairs and energy efficiency retrofits as part of the transaction. A jurisdiction could layer SLFRF with a
Section 223(f) loan to finance property acquisition or refinance.
• FHA Risk Share: In the Risk Share model, HUD delegates authority to HFAs to underwrite multifamily loans in exchange for
taking on a portion of the risk in the transaction. Recipients may layer SLFRF resources with a Risk Share loan to fund the
acquisition or refinancing of affordable properties. Currently 37 HFAs are approved to use Risk-Share and 22 of those have
active programs, or are finalizing onboarding, with the Federal Financing Bank Risk Sharing Initiative to maximize these
purchase/refinance opportunities.
SLFRF also may be used to convert vacant or abandoned properties to affordable housing in disproportionately impacted
communities. For example, SLFRF may be:
• layered with Section 108 Loan Guarantee Program funds for the eligible housing portion of a mixed use development;
• combined with HOME or HTF to provide deeply affordable units within mixed-income developments;
• combined with Section 514/516 Farm Labor Housing Direct Loans and Grants to repair or rehabilitate housing for domestic
farm laborers;
• utilized to convert office buildings to condominiums for homeownership;
• employed to finance the conversion of industrial or commercial properties to housing; or
• used to acquire vacant lots for affordable housing development.
3. Predevelopment
Recipients may use SLFRF to help fund pre-project development activities, which could include site work and land acquisition, that
precede housing development or rehabilitation of affordable housing.
AFFORDABLE HOUSING HOW-TO GUIDE I 6
• Land acquisition: Recipients may use SLFRF to acquire land for future development or within existing land acquisition
programs for purposes of affordable housing investments, including those funded with CDBG or Section 108 Loan Guarantee
Program funds.
• Predevelopment and site work: SLFRF may be used for predevelopment activity and site work to lay the ground for
affordable housing development. Recipients planning to layer SLFRF with HOME for new construction should review HUD
environmental review and planning requirements.
Opportunities to Use Limited Funds
Even if a recipient only has a small amount of funds remaining unobligated, there are a variety of eligible housing related uses that
do not require significant capital investment. These include:
• Subgrants to an organization for eligible uses under the CDBG program;
• Funding pre-development activities to enable future housing projects;
• Providing bill credits to homeowners to offset rising utility or insurance costs;
• Conducting home energy audits to support weatherization improvements of affordable housing;
• Establishing a Community Land Trust; or
• Forgiving fines and fees that would otherwise result in eviction or foreclosure.
Please note that this Affordable Housing Guide is provided for informational purposes only and is intended to provide examples
of ways that recipients can consider using SLFRF to invest in the development, repair, and operation of affordable housing. The
examples provided in this document are derived from the eligible uses of funds discussed in the SLFRF final rule and associated
guidance, including the Final Rule FAQs. Recipients should refer to Treasury’s final rule and guidance for more information about
SLFRF eligible uses and other program requirements, including Final Rule FAQ 4.8, which provides more information about
requirements for blending and braiding SLFRF funds. SLFRF funds are also subject to the terms and conditions of the agreement
entered into by Treasury and the respective jurisdiction, which incorporate the provisions of the final rule and the guidance that
implements this program.
AFFORDABLE HOUSING HOW-TO GUIDE I 7
For More Information:
Resources from Treasury for State and Local Fiscal Recovery Funds
Please visit the State and Local Recovery Funds website, final rule, final rule overview, final rule FAQs, the Overview of
the 2023 Interim Final Rule , and Compliance and Reporting Guidance. Questions should be sent to slfrf@treasury.gov.
Resources from the Department of Housing and Urban Development
Low-Income Housing Tax Credit
Mortgage Insurance for Purchase or Refinancing of Existing Multifamily Rental Housing
Housing Finance Agency Risk Sharing
HOME Investment Partnerships Program
Housing Trust Fund
Recapitalization of Public Housing through HUD’s Rental Assistance Demonstration (RAD)
Project Based Vouchers
Community Development Block Grants
Section 108 Loan Guarantee Program
HOME-ARP
Choice Neighborhoods Program
Section 202 Supportive Housing for the Elderly
Section 811 Supportive Housing for Persons with Disabilities
Resources from the U.S. Department of Agriculture
Section 502 Single Family Housing Direct Home Loans
Section 514/516 Farm Labor Housing Direct Loans and Grants
Section 538 Multifamily Housing Loan Guarantees
Resources about Programs Operated by Government-Sponsored Enterprises (GSEs)
Fannie Mae Sponsor-Dedicated Workforce Housing Program
Fannie Mae Sponsor-Initiative Affordability Program
Freddie Mac Workforce Housing Preservation Program
2024 FHFA Scorecard for Fannie Mae and Freddie Mac
AFFORDABLE HOUSING HOW-TO GUIDE I 8
AFFORDABLE HOUSING HOW-TO GUIDE I 9
File and source
- File
- department-of-the-treasury-updated-affordable-housing-how-to-guide-home-treasury-gov-system-files-13-4b5485ebef.pdf
- Size
- 248,887 bytes
- SHA-256
- 2507295a10c860541bad9718b640e126d402afe0db768fc82228b4679358dbcd
- Original
- home.treasury.gov