The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury have taken action to support a boost in affordable housing construction. These measures will give state and local Housing Finance Agencies (HFAs) more certainty with interest rates when using the Federal Housing Administration’s (FHA) risk-sharing initiative with the Federal Financing Bank.
Since taking office, The Biden Administration has focused on increasing the supply of affordable homes and lowering housing costs. These latest steps are part of a broader government effort to tackle the housing crisis.
We need more affordable homes, and HUD is stepping up to make that happen.”
Adrianne Todman, HUD Acting Secretary
Acting HUD Secretary Adrianne Todman also says, “we’re making it easier for our partners to finance the construction of thousands more rental homes for families in need.”
Behind The Boost in Affordable Housing Construction
One key change is the introduction of an interest rate “collar” on the Treasury rate used by HFAs. This collar sets both a floor and a cap on rates, helping to stabilize the interest rates under the Section 542(c) Housing Finance Agency Risk-Sharing Initiative. This update will also make the program easier to use, allowing for more affordable multifamily properties to be developed.
U.S. Deputy Secretary of the Treasury Wally Adeyemo emphasized the importance of this action in addressing the housing shortage. “To solve the affordable housing crisis, we need to increase housing supply,” Adeyemo said. “The Treasury-HUD rate collar initiative will lower the costs of constructing affordable housing across the nation. Treasury is committed to making housing more affordable and boosting economic prosperity.”
The interest rate collar will apply to HFA-originated mortgages for new construction or substantial rehabilitation of affordable multifamily housing for low-income individuals and families. The final interest rate will also be calculated after construction, using the established floor and cap rates, along with program-specific spreads set by the Federal Financing Bank.
Since the Biden Administration restarted the Risk Sharing Initiative in 2021, the program has enabled over $2.7 billion in financing. This has resulted in the development or rehabilitation of more than 16,200 affordable rental homes for low-income families, seniors, and people with disabilities. The FHA and the Federal Financing Bank plan to continue this program indefinitely, expecting to create or preserve about 38,000 additional affordable rental homes in the next decade.
