The Federal Housing Finance Agency‘s (FHFA) recent guidance on the Federal Home Loan Banks (FHLBanks) Affordable Housing Program (AHP), outlined in Advisory Bulletin 2024-05, introduces changes beneficial to developers of affordable multifamily rental projects.
Key updates include:
1. Streamlined Subsidy Determination: AHP subsidy determinations will focus on a project’s development budget instead of its operating pro forma, reducing uncertainty for developers regarding subsidy amounts and financing needs.
2. Flexibility with Capitalized Reserves: Developers benefit from guidelines allowing higher capitalized reserves if required by other funding sources, like LIHTCs. This flexibility can enhance project stability and help developers meet external funding conditions.
3. Supportive Services Funding Options: Developers offering supportive services (e.g., for elderly or homeless populations) can now choose whether to include these expenses in the overall budget or provide a separate services budget, aligning with practices of other affordable housing funders and simplifying reporting.
4. Feasibility and Cost Guidelines: FHLBanks are encouraged to align feasibility and cost guidelines with those of other funders to support project completion and operational sustainability. This alignment may allow developers to meet the requirements of multiple funders more easily, improving funding compatibility and reducing administrative burden.
These changes aim to simplify processes, ensure better funding compatibility and reduce burdens on developers, ultimately supporting the creation and sustainability of affordable multifamily housing.
As a reminder, here’s a breakdown of the key forms of capital and support that the FHLBanks offer through the AHP:
1. AHP Direct Subsidies (Grants): AHP grants can be used by developers to reduce the overall costs of acquiring, rehabilitating, or constructing multifamily rental properties for low- to moderate-income households. These grants don’t need to be repaid, which makes them a valuable source of equity in affordable housing developments.
2. Subsidized Advances (Loans): Some FHLBanks offer AHP subsidized advances, which are essentially low-cost loans that are passed on to developers through member financial institutions. These loans carry below-market interest rates, making them an affordable source of debt for project financing.
3. Project-Based Assistance: AHP funds can be layered with other public or private funding sources, such as LIHTCs, tax-exempt bonds or other subsidies, to maximize project feasibility and deepen affordability for residents.
