HUD Allocates More Than $10B of Stimulus to States, Localities

The Department of Housing and Urban Development yesterday allocated more than $10 billion of stimulus funding to states and localities. The funds included $2.25 billion to housing finance agencies to kick-start stalled housing projects that rely on low-income housing tax credits, $2 billion for Section 8 project-based housing contracts, and $1 billion for its community development block grant program.

"Recovery Act investments in HUD programs will be not just swift, but also effective: they will generate tens of thousands of jobs, help the families and communities hardest hit by the economic crisis, and modernize homes to make them energy efficient," said HUD Secretary Shaun Donovan.

The $10.1 billion that HUD allocated yesterday - just eight days after President Obama signed the bill into law - is about 75% of the total stimulus funding to be distributed by the department, with the remaining 25% to be competitively awarded later.

"We are very impressed and very pleased with how rapidly this was done," said Jim Miller, a partner at Winston and Strawn LLP and legislative counsel to the Affordable Housing Tax Credit Coalition. "It tells us that they are extremely dedicated to this."

The $2.25 billion allocation of funds to make up for the lack of private investment in low-income housing tax credits had been much sought after by housing advocates.

Demand for the credits has fallen along with the profits and tax burdens of companies, pushing down the prices for the credits. Developers typically sell the credits to increase equity in the development, which reduces the amount of bonds needed, as well as the rents and the cost of debt service.

The state housing credit allocation agencies will be required to competitively distribute the funds to developments that were awarded credits in federal fiscal years 2007, 2008, and 2009 but not purchased by private investors.

The money must be used for developments that are expected to be completed within three years of the enactment of the bill, and the agencies must commit no less than 75% of the funds within one year of the bill's enactment, according to HUD.

In addition, 75% of the funds they receive under this program must be spent within two years of the bill's enactment and 100% within three years. HUD will redistribute any funds not spent to other states that have fully utilized their funds.

Each of the 50 states, and the District of Columbia and Puerto Rico, received a portion of the funds. California garnered the largest chunk at $326 million, followed by New York with $253 million, Texas with $148 million, and Florida with $102 million.

Miller said he thinks the state agencies will "take their cues from HUD" and try to quickly make the allocations to developers. Miller called the multifamily rental housing program "the unsung hero" in the housing crisis, saying it "really does provide housing to people who cannot buy houses and shouldn't be buying houses."

HUD also provided $1 billion of CDBGs to 1,200 state and local governments, with larger states receiving larger allocations. The grants are often used for bond-financed projects. In addition, it allocated $2 billion provided in the package to fund 6,300 contract renewals under the Section 8 program.

The department will use the money provided to fund contract renewals on a full 12-month cycle, which will avoid the payment disruptions that have occurred in recent years and enable owners to maintain their properties in an acceptable condition, according to the department. Section 8 funds also are used by state and local housing finance agencies to help back bonds issued to finance the construction of multifamily housing projects.

Meanwhile, Vice President Joe Biden yesterday spoke to cabinet members at the first "recovery plan implementation meeting" at the White House, and said they will be overseeing a "monumental" but "doable" stimulus plan.

"We got to stay on top of it and we got to stay on top of it on a weekly basis, because this is about getting this out and spent in 18 months to create 3.5 million jobs and ... to tee this up so the rest of the good work that's being done here literally drop-kicks us out of this recession and we begin to grow again," Biden said.

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