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City officials are tapping American Rescue Plan Act dollars to expand affordable housing and reduce homelessness, challenges that predate Covid-19 but that were also heightened by it.
Some of the biggest investments cities are making with the $45 billion in direct federal aid they’re receiving from the American Rescue Plan Act are in the areas of housing and homelessness.
Just over a year after President Biden signed the law, local officials say the pandemic recovery package has been a critical source of support to address housing challenges that were worsened by the pandemic, but began well before the first case of Covid-19 was reported. The spending on housing and homelessness tends to cut across several categories the ARPA dollars were designed to target, including public health and providing services in disadvantaged communities.
Investments range from $21,600 to buy cell phone minutes for people experiencing homelessness in Boulder, Colorado, to more than $300 million to fund new affordable housing in Washington, D.C, according to a local spending tracker compiled by Brookings Metro, in partnership with the National League of Cities and the National Association of Counties.
Millions for Housing
The big pot of ARPA aid localities are receiving money from is the $350 billion State and Local Fiscal Recovery Funds program. The initiative is funneling federal dollars to states, cities, counties and smaller local governments. Cities have until the end of 2024 to assign this direct aid they receive, and until the end of 2026 to spend the money.
It wasn’t until January that the U.S. Treasury Department issued its final rule for the funds, confirming that the money could be used for a broad range of purposes, including investing in long-term affordable housing as well as emergency housing.
The Brookings tracker looks at $18.4 billion of local ARPA investments. As of February, it shows, cities and counties have dedicated some $2.3 billion of that total, or 12.7%, to housing programs. Nearly half of that total was dedicated to programs addressing homelessness.
In remarks to the National League of Cities in March, Biden urged cities to “use the flexibility we built into the law.” He also specifically cited housing investments in Tacoma, Washington, where the city and county are partnering to purchase a Comfort Inn for emergency shelter and eventual conversion to permanent affordable housing for people experiencing homelessness.
Hotel and motel conversions for shelter and long-term housing have proven to be a popular strategy for cities during the pandemic, as Route Fifty recently reported.
Biden also took note of New York City spending about $693 million of its ARPA funding on housing programs, including efforts to prevent evictions, cut homelessness, and preserve affordable housing for aging residents. Treasury included several examples of local housing investments among a list of highlights from early reports of cities’ ARPA spending.
12,000 Affordable Units in D.C.
Some cities are using ARPA funds for housing programs that predate the pandemic.
Washington, D.C., for example, has put $323 million from ARPA into its Housing Production Trust Fund, which is working to create 12,000 affordable housing units by 2025, a goal laid out by D.C. Mayor Muriel Bowser in the months before the pandemic began.
The Housing Production Trust Fund provides gap financing for projects with housing units that are affordable to people earning up to 50% of the median family income, or $64,500 for a family of four. Bowser has budgeted hundreds of millions to the trust fund over the years, but revenue losses and other spending priorities during the pandemic put its goals at risk, said Drew Hubbard, interim director for the D.C. Department of Housing and Community Development.
The ARPA funds helped the District maintain momentum with projects under the initiative, and to continue funding other repair and assistance programs that it runs through the trust fund. “That really helps us stay on track to meet that number through our existing housing programs,” Hubbard said. “D.C. is a high-cost jurisdiction, so affordable housing is one of the most pressing issues in the city.”
Acquisition Opportunities in Boston
In Boston, another place known for high housing prices, the city allocated $20 million of its ARPA funds to its Acquisition Opportunity Program, an effort that began in 2016 to purchase and preserve low-cost housing around the city.
The program is an attractive alternative to funding new construction, explained Jessica Boatright, the city’s deputy director of neighborhood housing development, because “it costs less money and less time to purchase an existing unit and guarantee its affordability than it does to build a new unit.”
Prior to the pandemic, the city had put some $40 million into the program to help acquire around 600 units over five years, Boatright says. The $20 million in ARPA funding will help purchase at least 150 more units.
“Acquisitions are the fastest way to add units to our deed-restricted housing stock, and on top of that they’re an incredibly powerful anti-displacement tool to make sure people who are housed can stay housed,” Boatright said. “We had a really big affordability problem before the pandemic. The pandemic has certainly exacerbated a lot of those issues and put a greater sense of urgency on addressing some of those.”
Martin Brown, a program manager for the National League of Cities Center for City Solutions, says he expects many more cities to begin reporting investments in housing programs as they benefit from clarity in Treasury’s final rule and as their budgets recover from the hit of Covid-19.
Local governments have faced scrutiny for the speed at which they’re allocating ARPA money, with some critics saying that they're moving too slowly. But White House officials told the Associated Press last year that the relatively long runway for spending the funds is “a feature, not a bug, of the program.”
Brown noted that some of the more common critiques of the aid program align with two competing narratives: That spending federal aid too quickly is contributing to inflation, or that spending it too slowly indicates it’s not needed. But Brown suggested cities should use the time available to them and that they should be deliberate in deciding how the aid can help address longstanding issues.
Cities have said for years that they need greater federal assistance to solve some of their most entrenched problems, including with housing and homelessness. The ARPA funding is beginning to show what that kind of support can accomplish, according to Brown. Mayors and county executives have often spoken about homelessness as a priority issue, but it often fails to make it to the top of cities' spending plans because of other needs, he added.
Now, the ARPA funding is in some ways highlighting an “undermet need” and showing cities do have the will to make housing and homelessness a priority when money is available, Brown said. “We’re really encouraged to see that cities are actually making the investments needed to begin addressing the crisis.”
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