The U.S. Department of Housing and Urban Development (HUD), working with the Treasury Department, will indefinitely extend the Section 542(c) Housing Finance Agency Risk-Sharing Initiative.
The initiative, offered through HUD’s Federal Housing Administration (FHA) and Treasury’s Federal Financing Bank (FFB), provides a critical source of capital for state and local housing finance agencies (HFAs) to support affordable rental homes.
The indefinite extension of the initiative allows even more HFAs to participate in the program.
Since the Biden-Harris Administration re-started the Risk Sharing Initiative in 2021, it has already provided access to nearly $2 billion in financing for the development or substantial rehabilitation of almost 12,000 affordable rental homes for low-income families, seniors, and persons with disabilities.
FHA anticipates that approximately 38,000 additional affordable rental homes will be created or preserved through the initiative over the next ten years alone.
“Simply put, the supply of housing has not kept pace with increasing demand, making housing too expensive for far too many people. HUD is using every single tool we have to ensure the families we serve can access affordable homes,” HUD Deputy Secretary Adrianne Todman said. “Today’s announcement means that, together with our partners at the Department of the Treasury, HUD will be able to continue providing the capital needed to build and preserve tens of thousands of rental units for the families who need our help.”
Through the Risk Sharing Initiative, eligible state and local housing finance agencies receive credit enhancement through FHA mortgage insurance and the Federal Financing Bank purchases the FHA-insured mortgages. With the FHA insurance credit enhancement in place, the Federal Financing Bank will purchase the mortgage, enabling the HFA to recoup their capital and make other investments in their communities.
The initiative had been set to stop accepting applications in September 2024, but this extension provides a pathway for housing finance agencies to continue to submit applications to FHA for mortgage insurance on an ongoing basis.
“Today’s announcement will build on the significant progress President Biden’s Investing in America agenda has made in expanding access to affordable housing and improving housing stability across the country,” Deputy Secretary of the Treasury Wally Adeyemo said.