In Brief:
Wake County, N.C., is set to open hundreds of new affordable housing units in the coming years thanks partly to funding it received from the American Rescue Plan Act, the Joe Biden administration’s 2021 pandemic relief bill.
The projects, which include a 176-unit apartment complex for people earning less than 60 percent of the median income, are being funded largely through the typical grab-bag of sources: federal low-income housing tax credits, public housing authority funds, bonding debt, bank financing, and private donations. But with affordable housing being more expensive than ever to build, the projects still had funding gaps. Wake County used $6.6 million of its unrestricted ARPA funds to help make ends meet, securing, in exchange, a commitment that 15 percent of the units will be leased to housing choice voucher holders.
It’s a move that gets the county a step closer to meeting its vast housing needs, and one that Vice President Kamala Harris has said serves as a model for local efforts to build affordable housing under her presidency, were she to win.
Harris cited Wake County’s use of ARPA funding to help build affordable housing when she unveiled the skeleton of a housing policy for her potential future administration this month. Other aspects of her proposal have gotten more attention, like her professed support for both zoning reform and rent caps, and the suggestion of offering $25,000 in down payment assistance to first-time homebuyers. But she also said her administration would create a $40 billion “innovation fund” that “would empower local governments to fund local solutions to build housing.” The proposal builds on a $20 billion housing innovation fund sought by the Biden administration in its FY2025 budget request.
As it stands, localities across the country are constrained in their efforts to support affordable housing by a limited pot of federal resources, which often come with a tight set of rules of their own. The federal government offers low-income housing tax credits that support affordable housing projects, but routinely gets far more applications for those credits than are actually available. It’s the same for housing choice vouchers, which only serve about 1 in 4 people who qualify for them. Public housing authorities also don’t have enough money to keep up with maintenance in many places, and are prevented by law from expanding the number of units they have.
Former President Donald Trump, the Republican nominee, has not sketched out a specific housing policy. He has said that he wants the Federal Reserve to lower interest rates, which economists say could help spur more housing development. But he has also signaled support for restrictive zoning in the suburbs, which economists say prevents new supply from being built and drives up costs. Neither candidate has offered a detailed plan on housing policy, and any major changes would require Congressional approval.
For some communities, the unrestricted ARPA funding has helped unlock affordable housing deals that otherwise might not have happened. Big cities and counties have spent about 10 percent of their state and local fiscal recovery funds, part of the ARPA package, on housing, according to Brookings.
“ARPA is in large part why we were able to accommodate so many projects over the last couple years,” says Mark Perlman, the Equitable Housing and Community Development Division director for Wake County.
The county routinely taps out its allocations of Community Development Block Grants and HOME Investment Partnerships Program grants, both of which help states and cities contribute to affordable housing projects. Its housing programs are tailored around federal definitions of affordability and median income calculations, and limited by the availability of federal resources, Perlman says.
“There are opportunities we have foregone that we just didn’t think we had the flexible resources for,” he says. “That was really the real advantage of ARPA. Giving communities access to significant funds that they can use in a lot of different ways — I think that would spur innovation.”
Federal and state lawmakers and candidates have taken a new level of interest in housing policy, as an affordability crisis has been growing for years and voters cite the cost of living as a top concern. Many of their proposals are built around changing local laws that prevent housing from being built in certain areas. The Biden administration has offered millions to communities to study zoning changes that could increase housing supply. Other proposals have sought to tie cities’ federal funding to enacting those reforms. The federal government has little formal control over local land use policies, but it has a lot of money.
“There are a lot of jurisdictions that are eager to support innovative construction techniques and financing tools but feel they don’t have the resources to commit to it,” says Paul E. Williams, executive director of the Center for Public Enterprise. “If there were federal support for them doing so they would more quickly jump on board and get these sorts of programs up and running.”
One example is the mixed-income development program in Montgomery County, Md. For decades the Housing Opportunities Commission in Montgomery County has been building housing projects with both market-rate and reduced-rate units, aiming to house people with a range of incomes. Recently the group established a $100 million housing production fund that allows it to directly finance, and own, mixed-income apartment complexes.
“Most of the way that governments participate in affordable housing around the country is to give soft loans to private developers who are doing tax credit deals,” says Zachary Marks, a senior vice president for real estate at the Housing Opportunities Commission.
When the public agency can develop and own its own properties, it’s able to recoup its money more quickly and redirect it to more projects. Similar revolving funds are being tried in Chicago and Atlanta. Marks and Williams see the outline of a new kind of federal support for more public development in the housing innovation fund, which Biden proposed and Harris has vowed to expand. If the federal government were to follow through, directing billions to cities to put directly into housing projects, the impact could go a long way.
“Having that heft behind it would allow us to ramp up our production by orders of magnitude,” says Marks. “It’s jet fuel.”
