New York’s pandemic-induced fiscal challenges have exacerbated its housing crisis, which will require a multi-pronged, holistic solution to fix in the long term. But there are simple steps we can take right now to help ease the severity of the problem. A bill recently introduced by Rep. Nydia M. Velázquez (D-NY), for example, would encourage development of affordable housing at a time when we need it most.
The legislation, H.R. 8824, would both reestablish the Federal-Financing Bank and Risk Sharing Program and expand it to ensure that community development financial institutions are eligible for participation. The Department of Housing and Urban Development (HUD), in conjunction with the Treasury Department, could also reauthorize the program, which lapsed in 2018.
No matter how it is done, doing so would have the potential to dramatically lower the cost of capital for communities seeking to construct and finance affordable housing.
The program, originally introduced in response to the financial crisis, was created during the Obama administration as a joint effort between the U.S. Department of Housing and Urban Development (HUD), and the U.S. Department of Treasury. Over less than a decade, it was responsible for the creation of over 20,000 units of affordable housing nationwide – including over 3,000 units right here in New York City. Despite this success, the Trump administration chose not to extend the program past its expiration in 2018.
With few other conventional financing options currently available, reimplementing this successful program would be a smart strategic move.
It would ultimately allow Housing Finance Agencies, which have a track record of creating affordable housing in neighborhoods across the nation, make decisions about affordable housing investments in their respective communities while generating much-needed revenue for the federal government.
Proven public-private partnership models like these are a targeted approach to addressing a housing crisis that has only been exacerbated by the pandemic. By leveraging federal tools to encourage private investment, the risk to taxpayers is ultimately reduced with housing finance agencies instead taking on half of the credit risk exposure. In short: This proposal will save taxpayer money –and that is needed now more than ever before.
Now is the time to reestablish this critical program. Tens of thousands of New Yorkers risk losing their homes with the scheduled expiration of the eviction moratorium in the new year, and thousands more could soon be facing housing insecurity with another surge of COVID-19 infections underway. A tried-and-true method of reducing borrowing costs, generating capital, and closing the gap is the obvious next step. We have proof that this program works; we just need to bring it back.
Encouraging investments in affordable housing will not only help to keep vulnerable New Yorkers in their homes, it will help drive our economic recovery.
A New York State Association for Affordable Housing (NYSAFAH) study found that a typical 100-unit affordable housing project in New York can lead to an estimated 175 construction jobs, 20 additional permanent jobs, and $3.6 million in sustained local economic activity.
Reestablishing the Federal-Financing Bank and Risk Sharing Program would be a win-win for New York and the nation overall. Communities are in desperate need of a vehicle to increase affordable housing production and reestablishing this program will play an important role in addressing our housing crisis head-on.