White House Ties Transit Funds to Affordable Housing

The Biden Administration has released a new Housing Supply Action Plan that aims to “close the housing supply gap” within five years—citing Moody’s estimate of a national supply shortage of more than 1.5M homes—and to create hundreds of thousands of affordable housing units in the next three years.

The action plan instructs the US Department of Transportation to prioritize federal infrastructure funding for transit-oriented projects that include residential developments with affordable housing.

The plan also leverages federal infrastructure funding to induce locations to reform zoning laws to eliminate barriers to affordable housing. DOT has been authorized to use infrastructure funding grants as “rewards” for locations that have reformed zoning and land-use policies to permit more affordable housing.

The Administration also said it will designate the new supply of affordable housing for owner-occupants, saying in a statement that it is doing this to address “the growing trend of large institutional investor purchases of single-family homes.”

In its announcement of the action plan, the Administration revealed that DOT earlier this year released three funding applications for competitive grant programs totaling nearly $6B in funding that, in the government’s words, “rewards jurisdictions that have put in place land-use policies to promote density and rural main street revitalization with higher scores in the grant process.”

“DOT will continue to include language encouraging locally driven land use reform, density, rural main street revitalization and transit-oriented development in transportation discretionary grant programs,” the White House press release said.

The US Economic Development Administration will designate economic development projects “that enhance density in the vicinity of the development” as investment priorities for its competitive grants, according to the plan.

The Biden Administration is promising to “work with the private sector to address supply chain challenges and improve building techniques to finish construction in 2022 on (more) new homes in any year since 2006.”

The housing action plan proposes to expand federal funding for manufactured housing and smaller multifamily residential buildings, as well as introduce new financing mechanisms to support affordable housing.

The White House said the Administration wants to “ease the burden of housing costs,” noting that housing prices have been a key driver of inflation.

According to the plan, Fannie Mae will consider the purchase of Construction to Permanent loans (where one loan finances the construction but also is a long-term mortgage).

The Administration also is proposing to expand the federal Low-Income Housing Tax Credit, which provides credits to private investors to develop affordable housing, as well as the HOME Investment Partnerships Program, which provides grants to states and localities to fund housing.