On May 28, 2021, the Biden-Harris Administration released Congress’s proposed budget for the US Department of Housing and Urban Development (HUD) budget for 2022. The budget, which plans to address major housing concerns over affordability and current housing shortages, is requesting $68.7 billion for the 2022 fiscal year, $9 billion more than in 2021, equivalent to a 15% increase year over year.
HUD Secretary Fudge stated in this 2022 Discretionary Funding Request that the budget would be used to improve existing HUD-assisted housing while creating new affordable housing and to tackle homelessness in addition to expanding existing rental assistance and low-income housing programs. The Housing Choice Voucher program, commonly referred to as Section 8, would have $30 billion allocated to provide housing assistance to 200,000 additional households outside of the 2.3 million low-income families it already serves. $3.5 billion would be dedicated to prevent and reduce homelessness through grants, $1.9 billion would be specifically used for the development of affordable housing, and $4 billion for Public Housing modernization grants and energy-efficient improvements.
How it impacts investors
Most of HUD's programs, including the low-income housing tax credit (LIHTC) and Section 8 programs, rely on the private market to supply the majority of affordable housing offered through these programs. The increased budget -- when coupled with The American Jobs Plan, an overarching and complementary bill that would allocate an additional $213 billion to building and preserving affordable housing -- means investors should be taking careful note of affordable housing as a long-term investment opportunity.
Additional funds issued through HUD and the American Jobs Plan means more investors can participate as affordable housing providers while still achieving a desirable return. The programs will not only offer more funds but will also issue new programs and tax credits to help qualify new investments, including mixed-income housing projects through the Neighborhood Homes Investment Act (NHIA), which offers investors and developers $20 billion worth of tax credits over the next five years for developing or rehabbing 500,000 single-family homes specifically for low- and middle-income earners, among others.
The budget request right now sits as simply that -- a request. Congress will draft a vote on spending bills over the next few months, including The American Jobs Plan. In the meantime, real estate investors should continue to educate themselves on what opportunities, tax credits, bonds, and other factors go into affordable housing investment to determine if it’s the right fit for them. While owning and managing affordable housing isn’t for everyone, those who choose to participate may benefit over the long term while making a positive social impact.