The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, authorized in 2021 as part of the American Rescue Plan Act (ARPA), was created to aid state, local, and tribal governments in responding to and recovering from the COVID-19 pandemic. Though SLFRF were primarily intended to serve as emergency funding and recipients were required to spend the funds by December 2026, some eligible uses included longer-term projects, such as affordable housing development.
This inclusion suggested a recognition from the federal government that emergency response measures must not only meet the needs of the current moment but should also build communities’ capacity to respond to future emergencies.
Many local governments responded favorably to the federal government’s encouragement. Our 2021 analysis found that affordable housing development was among the most popular housing-related uses for SLFRF across 29 cities. Now that all recipients have received their full SLFRF allocations and have started to report on their uses, we updated this analysis to include all cities and counties with populations greater than 250,000 to examine whether and how localities are continuing to use SLFRF to address affordable housing needs and build longer-term resilience. Our analysis does not include state or tribal governments, who are also spending ARPA funds on housing uses.
Our findings highlight several lessons that can inform federal responses to future emergencies, and underscore the urgent need for additional, ongoing federal funding for affordable housing.
Local governments continue to dedicate emergency funding to affordable housing needs, despite significant barriers
We found that affordable housing continues to be a popular use of the recovery funds. As of October 2022, the 330 local SLFRF recipients for whom data were available had budgeted more than $3 billion for housing-related uses, of which $1.2 billion was set aside for 165 affordable housing development and preservation projects.
Though this is a relatively small share (just under 2 percent) of their total SLFRF allocation of $63 billion, it’s still a significant amount, on par with annual funding for the US Department of Housing and Urban Development’s HOME Investment Partnerships Program, the largest source of federal funding for affordable housing development other than the Low-Income Housing Tax Credit.
Recipients’ planned affordable housing projects included traditional development and preservation, standing up housing trust funds, purchasing properties for a land bank, and establishing revolving loan funds.
Many localities are also pursuing multipronged strategies. Buffalo allocated more than $16 million to an Affordable Housing Advancement Fund, which would fund rental assistance for public housing residents, address funding gaps in existing affordable housing projects, and create a housing trust fund, with the goal of addressing “both short-term and long-term housing issues” in the city.
Some localities are also choosing to fund nonmarket housing with the SLFRF to ensure affordability in perpetuity. Minneapolis dedicated $4 million to gap financing to enable the Minneapolis Public Housing Authority to rehabilitate existing public housing and develop new units, and Washington’s Pierce County allocated funding to the production of affordable housing on land stewarded by the Tahoma Community Land Trust.
However, despite the administration’s attempts (PDF) to ease the use of State and Local Fiscal Recovery Funds for affordable housing development, localities continued to face significant barriers in using the funds for this purpose.
In recently released research, we explore how six cities and counties across the country are using SLFRF to address affordable housing needs. We find that many struggled with the short obligation and expenditure timelines, given the length of time needed to build and preserve housing, as well as a lack of clarity on the eligible uses of the funds, initial restrictions on using SLFRF to provide long-term loans, and difficulty prioritizing the lowest-income households without additional sources of ongoing subsidies.
Lessons for future emergency responses
These lessons can inform the federal government as it reflects on its pandemic response and prepares for future emergencies. They point to the need to provide more explicit guidance on which emergency funds are intended to be deployed quickly, which should be used to support longer-term projects that build resiliency, and the need to invest in building the capacity of lesser-resourced localities to create long-term plans and apply for and absorb federal funds.
The most critical takeaway, however, is the need for additional, ongoing federal funding for affordable housing. Although the Coronavirus State and Local Fiscal Recovery Funds may help communities alleviate some of their housing shortage, the need to obligate the funds by December 2024 and fully expend them by December 2026 means the emergency recovery funds can’t support the expansion of affordable housing in the longer term. A long-term increase in federal funding for affordable housing can both provide more residents with a safe and affordable place to call home and help build the resiliency of individuals and communities to respond to and recover from crises.