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New Treasury Guidance Adds Flexibility for Unobligated ERA 2 Dollars

Published on July 29, 2022 by Jennifer Schwartz
New Treasury Guidance Adds Flexibility for Unobligated ERA 2 Dollars

On Wednesday, the U.S. Department of the Treasury updated its Frequently Asked Questions (FAQs) guidance for the Emergency Rental Assistance (ERA) program to enumerate flexibilities provided under the American Rescue Plan Act for ERA 2 dollars that are unobligated as of October 1, 2022. The updated FAQs allow such funds to be used for the construction, rehabilitation, or preservation of affordable housing projects and the operation of affordable housing projects that were constructed, rehabilitated, or preserved using ERA 2 funds.

To be eligible to take advantage of these flexibilities, a grantee first must obligate 75 percent of its ERA 2 grant on ERA-eligible financial assistance, housing stability services, and administrative costs. The 75 percent benchmark is based on the granteeā€™s ERA 2 grant amount as adjusted to account for any voluntary reallocation or recapture of funds. If a grantee meets the 75 percent threshold after October 1, 2022, it may begin using ERA 2 funds for the more flexible purposes once it reaches that threshold.

Such funds must be used to benefit very low-income (VLI) households earning no more than 50 percent of area median income (AMI). Properties that receive ERA 2 dollars for capital assistance must remain affordable for a minimum of 20 years.

Treasury seeks to minimize the administrative burden of using ERA 2 as a capital subsidy in conjunction with other affordable housing programs; thus, it requires ERA 2 funds used for capital assistance to conform to and meet program requirements of one or more of the following affordable housing programs: The Housing Credit, HOME, HOME-ARP, Housing Trust Fund, Public Housing Capital Fund, Indian Housing Block Grant, Section 202 Supportive Housing for the Elderly, Section 811 Supportive Housing for Persons with Disabilities, Farm Labor Housing Direct Loans and Grants, and USDA Multifamily Preservation and Revitalization.

Grantees may structure ERA 2 funds as loans, including no-interest loans and deferred-payment loans; interest subsidies; grants; or other financial arrangements. They also may be used to establish or invest in revolving loan funds.

Further, while ERA 2 funds used for these purposes must benefit VLI households, they may be used in properties that also serve higher income households, as long as units are set aside for VLI households. The total investment of ERA 2 in the project must be proportional to the total development costs that may be attributed to the VLI units.

Funds may also be used for eviction prevention purposes such as those currently allowed under Housing Stability Services but without the limit of 10 percent of total grant amount.

NCSHA has long advocated for maximum flexibility for these funds, and in particular for grantees to have the ability to use these funds for capital assistance, as often the biggest barrier to housing stability for very low-income households is the insufficient supply of affordable housing.