Both Ottawa and Kent counties are considering using federal stimulus funds to create revolving loan funds to help ease the area’s housing shortage by providing continuity of funding instead of funding individual projects.
The two counties have sifted through hundreds of American Rescue Plan Act (ARPA) project funding proposals since the summer. Affordable housing, along with the desire to create a revolving housing loan fund that could help projects on an ongoing basis, was identified as an ARPA spending priority in both counties.
Many municipalities have also considered dedicating at least a portion of ARPA funding to create a revolving loan fund for housing, said Ali Mooney, management consultant at Guidea national consulting firm helping cities and counties through the ARPA process.
“Creating a revolving housing fund is a long-term vision instead of just using the funds for finished projects every now and then,” Mooney said. “It’s a good use because it also allows people to take those funds and leverage them to continue to help produce affordable housing in the future.”
A housing loan revolving fund could provide additional financing in the form of low-interest loans to developers of affordable housing projects. Typically, these funds are maintained by principal repayments and increased through interest payments.
Under recent ARPA-supported housing revolving loan fund proposals, organizations or private donors could also contribute to the fund, and developers could apply for funding through an application process.
The Kent County Board of Commissioners will vote Nov. 14 to select which projects will receive a portion of the county’s $127 million in ARPA funds. The Ottawa County Finance and Administration Committee will consider projects that would share $57 million in ARPA funds on Nov. 15.
“In general, (a revolving loan fund) is a concept that has had a lot of support, but a government cannot invest in housing with general funds in Michigan, so it would have to be funds somewhere, which could be ARPA money,” Kent County Administrator Al Vanderberg said.
In Kent County, several specific housing projects have submitted applications for a share of the county’s federal stimulus funding. Vanderberg taking a revolving loan fund approach could support these and other projects in the future.
He added that the county would not manage the revolving loan fund if created, although county funding would initiate the process to create it. A community development financial institution (CDFI) would potentially receive the public funding, and some CDFIs could provide “significant matching potential” to extend other financial contributions to the fund, Vanderberg said.
“A CDFI partner would underwrite and administer the loans and also support private investments,” Vanderberg said. “If that is the direction the board wants to take, we would probably set up a committee to advise what we would like to happen with the fund.”
Interest in housing increases
David Sernick, who is a management consultant for state and local governments at Guidehouse, noted that many of his municipal clients were already considering setting up a housing revolving loan fund before the ARPA process. Housing in general has been a more recent priority for his clients, he said.
“It’s very clear that housing is one of those things that seems to be bipartisan in nature at this point, which is really nice in our current political climate,” said Sernick, who consulted with Kent County in the as part of its ARPA process. “It’s something that interests everyone.”
Over the summer, the Ottawa County ARPA task force recommended using $8 million in ARPA funds to create a revolving loan fund for housing. The county council also gave final approval to two affordable housing projects Aug. 23 to meet a tight schedule from project developers, county tax services director Karen Karasinski said.
Ottawa County Board of Commissioners Approved $1.5 Million in ARPA Grants for Nonprofit Social Services Samaritans for the construction of 43 affordable one-bedroom units and 10 affordable two-bedroom units in Spring Lake. Additionally, the county council also approved the non-profit developer Dwelling placerequesting $2 million in ARPA grants for a 46-unit apartment project in downtown Holland.
Both ARPA grants are contingent on Dwelling Place and Samaritas receiving low-income housing tax credits from the state in the April 2023 application round.
“A number of lenses have been considered by the (Ottawa County ARPA Working Group), and affordable housing is an area that cuts across multiple sectors,” said Karasinski, who is also a member of the ARPA Working Group. “It’s important for business and it kind of touches on a lot of the priority areas that we’re looking at.”
It was also not always clear that ARPA funding could be used for revolving loan funds for housing. In July 2022, the US Treasury Department announced a rule change to give municipalities more flexibility over how funds are used for housing projects, Mooney said.
The use of ARPA funding to create housing loans comes with certain restrictions, including establishing an affordability period of at least 20 years for housing and prices for rental housing that must be equal to or less than 65% of the region’s median income, with some exceptions. , Mooney said.
Other ARPA-funded housing uses that municipalities are considering include building new units or supportive housing for the homeless, down payment assistance programs for new homeowners, and home repair programs for help preserve existing units, Mooney said.
“I noticed there was an openness to discuss other possible ways to impact long-term affordability and housing in general, which is good,” Mooney said. “In the past, housing was something that maybe wasn’t in the forefront as much. Certainly during the pandemic it has become even more apparent that housing stock is very important, especially when it is where people needed to stay to be safe. Talking about how to impact larger communities in a holistic nature is something more communities are willing to discuss.