The U.S. Department of the Treasury updated its Frequently Asked Questions (FAQs) guidance for the Emergency Rental Assistance (ERA) program to enumerate flexibilities provided under the American Rescue Plan Act for ERA 2 dollars that are unobligated as of October 1, 2022. The updated FAQs allow such funds to be used for the construction, rehabilitation, or preservation of affordable housing projects and the operation of affordable housing projects that were constructed, rehabilitated, or preserved using ERA 2 funds.

To be eligible to take advantage of these flexibilities, a grantee first must obligate 75 percent of its ERA 2 grant on ERA-eligible financial assistance, housing stability services, and administrative costs. The 75 percent benchmark is based on the grantee’s ERA 2 grant amount as adjusted to account for any voluntary reallocation or recapture of funds.

What does this mean for Affordable Housing Development in Alabama?

If a grantee meets the 75 percent threshold after October 1, 2022, it may begin using ERA 2 funds for the more flexible purposes once it reaches that threshold.

Treasury seeks to minimize the administrative burden of using ERA 2 as a capital subsidy in conjunction with other affordable housing programs; thus, it requires ERA 2 funds used for capital assistance to conform to and meet program requirements of affordable housing programs. 

Then, AHFA may structure ERA 2 funds as an additional funding source for awards of Housing Credits, HOME, HOME-ARP, or Housing Trust Fund loans.

Further, while ERA 2 funds used for these purposes must benefit VLI households, they may be used in properties that also serve higher income households, as long as units are set aside for VLI households. The total investment of ERA 2 in the project must be proportional to the total development costs that may be attributed to the VLI units.