US Wants to Use Billions in Unused COVID Aid

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Billions of unspent pandemic dollars have been made available for housing projects as the federal government steps up efforts to tackle the shortage of affordable homes.

The US Treasury announced Tuesday that unused money from State and Local Fiscal Recovery Funds can be deployed for housing projects, freeing up about $40 billion, Reuters calculated.

These funds are eligible for developments that will house families earning 120% the area’s median income, a jump from the prior 65% threshold. Otherwise, they can be spent on federal housing programs, or federally-supported initiatives to house essential workers.

Meanwhile, leftover funds from the Emergency Rental Assistance program can be rerouted towards low-income housing initiatives, including land acquisition, pre-development, construction and rehabilitation. 

The program primarily served to prevent COVID-era evictions. According to Reuters, around $6.9 billion was unused by June 30, 2023.

“While the ERA program has already made more than 12.3 million household payments to keep renting families in their homes, these changes will build out the pipeline to bring additional rental units onto the market,” the Treasury announcement said. 

The department also indefinitely extended backstop financing for a risk-sharing program between the Department of Housing and Urban Development and local financing agencies. The program will “dramatically” lower capital costs for low-risk developments, the Treasury said.

Since the pandemic, US housing prices have sharply appreciated as homebuilders play catch-up with demand. High mortgage rates have kept homeowners off the market, decreasing the number of existing properties available for sale.

Meanwhile, the department is also taking a closer look at how climate risks may impact housing stability, Deputy Treasury Secretary Wally Adeyemo outlined in a related blog post. 

“We are working with federal and state regulators studying rising insurance costs and decreasing insurance coverage so that we can understand the impact of lack of affordable insurance on housing supply in different parts of the country,” he wrote. 

At the moment, the Treasury lacks granular data on where homeowners are being hit hardest, and where insurers are pulling back, he said.