Homeownership development
Federal funding for homeownership development
The federal government tends to allocate most of its funds for the development of affordable housing towards rental units. However, it is important to recognize that there are several other options available for constructing new affordable homes that can be purchased rather than rented. Investing in homeownership opportunities can be a crucial strategy for promoting residential stability and wealth-building, especially for low- and moderate-income families.
Affordability period and sale restrictions. Homeownership units constructed or rehabilitated with federal funds are usually required to remain affordable for a specified period. The period varies by funding stream and by the amount of funding source invested but is generally between five and 30 years. The home may only be sold to another eligible buyer during this period. These requirements help maximize the initial investment’s public value, but they do require oversight and administrative management. Jurisdictions are generally responsible for maintaining affordability over this period and may be responsible for recording a deed restriction, certifying the eligibility of subsequent buyers, and ongoing enforcement of program requirements. Localities should ensure they can manage these tasks or work with an experienced partner.
Using State and Local Fiscal Recovery Funds (SLRF) before they expire. SLFRF may support the development of affordable homeownership units but must be obligated by the end of 2024 and fully expended by the end of 2026. Jurisdictions wishing to use SLFRF for housing development should consider how they can use this temporary resource promptly. For example, SLFRF could support pre-development work in the early stages of a project while other funding sources support construction. Funding could also finance projects that can meet expenditure deadlines.
Converting affordable rental units to ownership. After the initial 15-year affordability period expires, tenants may purchase their LIHTC-funded rental properties. Jurisdictions interested in supporting LIHTC developments that plan to exercise the homeownership conversion option should examine the state’s Qualification Allocation Plan to better understand whether this option is feasible. Jurisdictions should also carefully assess the implications of removing units from the rental inventory on housing availability and affordability.
For more information, see this discussion of Increasing Access to Sustainable Homeownership and this brief on Deed Restricted Homeownership.