State Programs

11 min read

HFAs Working to Put Influx of Funding to Good Use

As an influx of federal dollars are expected for affordable housing, state housing finance agencies (HFAs) plan to use the money not only to increase existing programs, but in some cases, see this as a historic opportunity to make significant changes.

States have received funding for rental assistance, mortgage assistance, housing, counseling assistance, as well as additional Community Development Block Grant funds.

The 50 different state HFAs all operate differently. For some states, like Georgia, the HFA is a one-stop shop for everything related to affordable housing. Those agencies currently are focused on getting rental assistance dollars out the door to qualified recipients.

Money from COVID relief bills, including the American Rescue Plan Act, means HFAs can do more of their core business, but a number of state agencies also are looking at the funds as an opportunity to make the system more efficient and help promote innovation in building construction, experiment with different housing development models, increase housing production or address issues of homelessness in a new way.

“We’re really looking at this as a new and unique opportunity to utilize all these funds in the best way that we can,” Tonya Cureton Curry, deputy commissioner of housing at the Georgia Department of Community Affairs, says. “It’s a great time for affordable housing because we’re not usually seeing the levels of funding that we get.”

DCA is looking at all the funding and all the housing programs to make sure additional funds are utilized efficiently, Curry explains. Some of the additional funding will go toward increasing the level of services they already provide, such as the state’s Community HOME Investment Program, or CHIP, which goes to housing rehabilitation and small homeownership developments.

DCA also is looking at possible new programs as well, such as small single-family developments.

“That’s something that we’ve never done in Georgia, but with the amount of monies that we’ve received in home funds, we can set up a financing round similar to the way we do our multifamily development rounds,” Curry says. “That’s something that we’re exploring. It’s very much in the initial stages of discussion, because we have not in the past had this level of resource.”

The agency’s current focus rests on distributing rental assistance and the soon-to-come mortgage assistance, but it’s also looking at its aging housing stock.

“We regularly evaluate our qualified allocation plan to determine, do we need to have more of an emphasis on rehabilitation or more on new construction?” Curry says.

In the Northeast, Daniel Brennan, director of Maine Housing, sees the additional funding as an opportunity to solve systemic gaps in housing, while making sure core business lines are operating the way they should. In addition to federal dollars, the state legislature passed the State Low Income Housing Tax Credit and the governor signed off on $15 million in affordable housing bonds in 2019.

“So, the capital dollars to do our work is there,” Brennan says. “The priority isn’t just getting the work done in the next couple of years. The priority is getting fundamental changes done over the next few years.”

Brennan wants to push innovation, improve the system for people experiencing homelessness and increase multifamily housing production to 1,000 units per year.

“We want to transition from crisis management to long-term thinking, because one of the opportunities of the pandemic is a lot of money has come into our agency,” Brennan says. “How can we best use that money?  Not in a reactive way, but a proactive way to solve systemic and historic gaps in our housing.”

That includes using the federal dollars to redesign the state’s homelessness service delivery system, Brennan says. Maine Housing administers all federal funds for the state’s homeless assistance. During the pandemic, temporary shelters were set up that allowed people to socially distance and have more privacy than traditional shelters.

“Then you realize, ‘wait a minute, these folks are actually thriving a little bit,’” Brennan says. “They’re doing much better because they have a little privacy. So, we want to take these federal dollars that we have coming in and take a more regional approach. Within each of those regional hubs, there may be the need to acquire a building.”

During the pandemic, Maine’s affordable housing shortage was exacerbated when people moved from city centers on the East Coast, like Boston and New York, to the largely rural state, sometimes giving sellers cash offers, notes Brennan.

The affordable housing shortage isn’t unique to Maine, of course. Some HFA directors are actively thinking of ways the agencies can help increase scale and efficiency to increase production of affordable housing.

In Maine, the agency is looking to see how it can promote the use of innovations to increase the number of units a year produced for multifamily developments.

“We were building 250 to 300 units a year with our existing resources,” Brennan says. “We’ve got the state tax credit and then Congress says, ‘you know, fix the four percent floor on the LIHTC.’ We can do more now, so what do we need to get to like a thousand units a year?”

Innovation, such as 3D printing, will play an important role in ramping up the pace of housing production, Brennan notes.

“If we could steer more investment towards that, you may be able to actually create housing cheaper and maybe faster,” he says. Those are things that we’re actively working on.”

Maine Housing is a one-stop shop for affordable housing grants, tax credits and bonding authority, with the exception of community development block grants. Typically, when it allocates its nine percent LIHTC, it’s oversubscribed three or four to one, Brennan says.

“We can say we want these products in our buildings and that’s what would spur the innovation,” Brennan says. “We have the ability to do so. If I went out and did that today, that would be unfair to the manufacturers because they’re not ready yet, but the science and the innovation is happening. If they know that I’m here for the long term, which I am, then they’ll say, ‘Okay, we’re going to continue to invest in this innovative product.’”

Out west in Colorado during the pandemic, people living in larger cities, like Denver, migrated to rural areas, increasing the number of short-term rentals, adding pressure to the affordable housing market in those cities, Cris White, executive director and chief operating officer of the Colorado Housing and Finance Authority, says.

“The community impact was significant, because it ate up some of the housing and rental inventory that they might normally use for affordable purposes.”

But even in large cities, like Denver, where the median home price is $600,000, there is a huge supply-demand imbalance, White says. More housing supply in the state is desperately needed to fix this imbalance, which in turn would ease the burden on the multifamily rental side, perhaps even reduce rental costs. A role the CHFA can play in that is to advocate or embrace more efficient construction methods, such as prefabricated construction.

“That’s not really well embraced in Colorado, but it could be an answer to some of these supply issues,” White says.

To that end, CHFA has met with developers who use prefab technology, as well as 3D printing developers.

“We will try to finance those developments to prove the model,” White says. “We will take a risk on financing that type of development to prove it, and to the extent that it can be proven, the theory is that we can start getting some scale. Once we start getting scale and have a proven methodology, then we can start allocating tax credits and private activity bonds and really put a dent in this imbalance.”

The supply and demand imbalance for middle-income developments in Colorado is starting to look like the traditional affordable market, leading White to believe that a lot of capital will flow in that direction.

Robin Wiessmann, the Pennsylvania Housing Finance Agency executive director and chief operating officer, is also thinking about how to increase the scale of multifamily developments.

“The industry is very bespoke,” Weissman says.  “Every deal is really different, but we operate through a lot of the same parameters. The fact of the matter, we know what good housing elements are. Can’t we produce more and more units?”

“If you’re building something, you might as well build 60 or 90 units as opposed to 40,” Wiessman says.

Texas also recently saw a surge in housing demand due to corporate relocations into the state, especially in urban centers, such as Houston, Dallas and Austin, Bobby Wilkinson, executive director at Texas Department of Housing and Community Affairs, says.

“It’s great opportunities for people, but it’s a pressure on the demand side,” Wilkinson says. “You’ve got a bunch of Californians with $800 grand in their pocket, looking through central Austin housing. It’s good, but that filters down to where it affects folks’ ability to get entry- level homes.”

Texas received about $3 billion for rental assistance. That’s taken up a lot of the agency’s focus and it’s hired outside vendors to help, Wilkinson says.

The Texas agency doesn’t have plans to make any changes to its qualified allocation plan, Wilkinson says. It sees any one-time dollars to be used for one-time type capital expenditures, such as building service-enriched homeless shelters.

“I really like Haven for Hope in San Antonio,” Wilkinson says. “The amount of money we have isn’t enough to build one in every city, but to do something along those lines.”

Related to its core business, the agency’s goal is to keep hoop jumping to a minimum, which includes keeping low application fees and streamlining the approval process.

In April, the department’s board approved a streamlined underwriting process for four percent deals, Wilkinson says. These are deals in which the department is not issuing the loans, just allocating tax credits. Under the new process, those projects don’t have to go to the board for approval. It will help developers with their timelines and give department staff time to underwrite nine percent applicants on time.

In addition to spurring more production, HFAs also are looking at ways to address financing and tax credit concerns raised by project delays and increasing construction costs.

In Texas, the department also is looking at using National Housing Trust Funds to help shore up some of the 2020 nine percent deals that are having trouble, Wilkinson says.

“What they want is more equity,” Wilkinson says. “For now, we’re looking at getting some soft funds available to them. The conversation on additional equity is ongoing and nothing is final yet.”

While money from the American Recovery Plan Act hasn’t been allocated yet, Pennsylvania’s Wiessmann hopes that some funds will go to help plugging any gaps for multifamily developments. These gaps include supply chain disruptions that prolong production timelines, increased supply costs and concerns related to tax credit syndication.

“That’s a function of time and uncertainty,” Wiessmann says. “I’m about to communicate with our developers that we have to be flexible on timing so that the tax credit syndicators know that it may be a little delayed, but that these deals are going to close. So, that’s a stabilizing influence.”

In Colorado, the significant funds coming into the state will be going to the Department of Local Affairs’ Division of Housing. The Colorado HFA partners with the agency and already has started conversations with staff to focus on getting that money properly allocated, White says.

“I think a lot of that capital is going to be used for homeownership assistance, gap funding for projects that are supported by LIHTCs, affordable tax credits that we are the allocator of,” White says. “I think there’s going to be a lot of that sort of gap financing is going to be a big deal, and I think that’s going to be the case in middle- market transactions too.”

In Georgia, the DCA put a process in place encouraging developers to document what their needs are to make sure that it’s truly a valid need.

“That has happened through the scoring process,” Curry says. “We’ve got a policy that’s part of our upcoming [2022] scoring round that requires people to really document what that need is and to make those requests in the most credible way.”

It’s an involved process, but if they make a formal request for an increase, it must be fully documented, and it will impact their future allocation, Curry says.

“We need for them to be sure that they’re evaluating all of their costs before they come forward and make that request to us.”

Nushin Huq is a Houston-based freelance journalist. She has worked as a reporter covering energy markets and regulation, business and government – both federal and state.