The U.S. Department of the Treasury expanded capabilities for cities to use American Rescue Plan Act (ARPA) funds to support affordable housing initiatives. The recently released guidance allows cities to use ARPA funds for housing projects that meet several other federal program requirements or to provide loans for affordable housing investments.

Treasury previously only presumed eligibility for affordable housing projects that met the standards approved by the National Housing Trust Fund and Home Investment Partnerships Program. The new State and Local Fiscal Recovery Fund (SLFRF) guidance references additional federal programs such as the public housing capital fund, project-based rental assistance, and the low-income housing credit.

Cities may invest in the development, repair, or operation of affordable rental housing units if the unit has a maximum income of 65% of the area median income. The agreement must cover at least 20 years, although local leaders can establish a longer period of affordability. Treasury also strongly encourages cities to prioritize affordable housing close to employment centers and/or institutions that provide childcare, health care, services, and healthy food.

Treasury notes that other affordable housing projects may also qualify as eligible uses of SLFRF funds if they address the negative economic impacts of the pandemic. Most Kentucky cities elected to take the standard allowance offered by Treasury, which allows them to use their entire allocation to provide government services. Affordable housing projects would generally qualify as an eligible use under the revenue replacement provisions.

Kentucky cities have already obligated over $14 million of ARPA funds for affordable housing and homelessness initiatives through March 31, 2022. That figure represents more than 8% of the total SLFRF money cities obligated through that reporting period.