Janet Yellen Announces $100 Million Plan to Boost Affordable Housing

U.S. Treasury Secretary Janet Yellen will announce $100 million in new financing to increase affordable housing supply. This measure addresses chronic housing shortages, contributes to inflation, and aims to alleviate dissatisfaction with President Biden's economic policies. The funds stem from COVID-era investments in community lenders.

U.S. Treasury Secretary Janet Yellen will announce $100 million in new financing on Monday to increase the supply of affordable housing, the Treasury department said in a statement. The measure is one of several moves by the Treasury to try to address a chronic housing shortage - a concern of voters, a contributor to inflation and a source of dissatisfaction with President Joe Biden's handling of the economy ahead of the Nov. 5 presidential election.

The additional $100 million over three years comes from payments that the Treasury is receiving from prior COVID-era investments in community lenders to support small businesses, consumers and affordable housing projects. The 2021 Emergency Capital Investment Program injected over $8.57 billion into community lenders, who in turn invested $1.2 billion in 433 affordable housing projects, the Treasury said. It said it will create a new program at the Community Development Financial Institutions (CDFI) Fund that it estimates could support the financing of thousands of affordable housing units.

In excerpts of remarks at a public housing development project in Minneapolis, Yellen said she expects shelter inflation to moderate. "But we face a very significant housing supply shortfall that has been building for a long time. This supply crunch has led to an affordabilty crunch," Yellen said in excerpts of remarks. She added that the burden was greatest on low-income and Black households.

Yellen also is calling on the 11 Federal Home Loan Banks to devote at least 20% of their net income to housing programs, up from the legal requirement of 10% and the banks' voluntary commitment of 15%. Had this commitment been in place over the last five years, the 11 government-sponsored enterprises would have contributed nearly $2 billion more to housing programs than legally required, the Treasury said.

The Treasury is also providing state and local governments with guidance on using their remaining COVID-19 recovery funds to increase the supply of housing. This includes a "how-to guide" on using the funds to support construction. Another step Yellen will announce is the update of a rule for an existing housing program in the CDFI Fund that reduces the administrative burden, allowing more resources to support construction and preservation of housing. (Additional reporting by Gursimran Kaur in Bengaluru; Editing by Alison Williams and Barbara Lewis)

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