The U.S. Department of Housing and Urban Development (HUD) and the U.S. Department of the Treasury have announced new measures to provide more interest rate certainty for state and local Housing Finance Agencies (HFAs). These agencies utilize the Federal Housing Administration’s (FHA) risk-sharing initiative with the Federal Financing Bank to finance new construction of affordable housing.
Since its inception, the Biden-Harris Administration has focused on increasing the supply of affordable homes and reducing housing costs for Americans. This commitment is detailed in a White House fact sheet released today, highlighting HUD's recent actions aimed at boosting affordable home construction.
HUD Acting Secretary Adrianne Todman will discuss these updates during a press conference in Milwaukee, WI. “Let’s face it – we don’t have enough affordable homes. Here at HUD, we are making changes to build new, quality, affordable homes like never before,” said Todman. “Today, alongside our colleagues at the Department of the Treasury, we are announcing a crucial move that will enable our partners to use our financing to build tens of thousands more rental homes for the families we serve.”
A key component of this initiative is an interest rate "collar" on benchmark Treasury rates used by HFAs under Section 542(c) Housing Finance Agency Risk-Sharing Initiative. This collar will facilitate increased development of new multifamily properties using risk-sharing program financing.
“The Biden-Harris Administration knows the key to reversing the affordable housing crunch is to take actions that increase housing supply," stated U.S. Deputy Secretary of the Treasury Wally Adeyemo. "The Treasury-HUD rate collar initiative will help reduce the cost to construct more affordable housing that is so urgently needed in neighborhoods across the country."
The interest rate collar will apply to HFA-originated mortgages for new construction or substantial rehabilitation of multifamily affordable housing for low-income individuals and families when FHA conditionally endorses an application for mortgage financing.
“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,” noted Assistant Secretary for Housing and Federal Housing Commissioner Julia Gordon.
Deputy Assistant Secretary for Multifamily Housing Programs Ethan Handelman added: “We believe this important update to the risk-sharing initiative will not only increase the creation of new, deeply affordable housing for low-income families but also provide additional flexibility making it usable by more state and local HFAs.”
Since 2021, when this administration re-started the Risk Sharing Initiative, over $2.7 billion in financing has been accessed for developing or rehabilitating over 16,200 affordable rental homes. The program was indefinitely extended earlier this year with expectations that approximately 38,000 additional affordable rental homes will be created or preserved over ten years.
About Section 542(c) Housing Finance Agency Risk-Sharing Initiative:
This initiative allows eligible HFAs to enter contracts with HUD where FHA insures multifamily mortgages originated by an HFA used for constructing or rehabilitating properties with affordable units. Under these contracts, HUD and HFA share potential loss risks from mortgage defaults while enabling HFAs to recoup capital through Federal Financing Bank purchases.
