Ottawa and Kent counties are both considering using federal stimulus money to create revolving loan funds to make a dent in the region’s housing shortage by providing financing continuity instead of funding individual projects.
Both counties have been sifting through hundreds of American Rescue Plan Act (ARPA) project funding proposals since the summer. Affordable housing, as well as the desire to create a housing revolving loan fund that could help projects on an ongoing basis, has been identified as an ARPA spending priority in both counties.
Many municipalities have similarly considered dedicating at least some ARPA funding to create a housing revolving loan fund, said Ali Mooney, a managing consultant at Guidehouse, a 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 finite projects now and then being out of funds,” Mooney said. “It’s a good use because it also enables people to take these funds and leverage them into continuing to assist with the production of affordable housing in the future.”
A revolving housing loan fund could provide gap financing in the form of low interest loans to affordable housing project developers. Typically such funds are maintained by the repayments of principal and grow through interest payments.
Under the recent ARPA-backed housing revolving loan fund proposals, organizations or private donors also could contribute to the fund, and developers could request funding through an application process.
The Kent County Board of Commissioners will vote on Nov. 14 to select projects that receive a piece of the $127 million of the county’s 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’s had a lot of support, but a government can’t put money into housing with general funds in Michigan, so it would have to be special funds from somewhere, which could be ARPA money,” said Kent County Administrator Al Vanderberg.
In Kent County, several specific housing projects submitted requests for a share of the county’s federal stimulus funding. Vanderberg taking a revolving loan fund approach could support those as well as more projects in the future.
He added that the county would not run the revolving loan fund if it was created, though county funding would start the process to establish it. A community development financial institution (CDFI) would potentially receive the public funding, and some CDFIs could bring “significant matching potential” to expand on other financial contributions to the fund, Vanderberg said.
“A CDFI partner would underwrite and administer the loans and also support the private investments,” Vanderberg said. “If this is the direction the board wants to go, we would likely create a committee to advise what we would want to happen with the fund.”
Housing interest grows
David Sernick, who serves as the managing consultant for state and local government at Guidehouse, noted that many of his municipal clients were already considering plans to create a housing revolving loan fund before the ARPA process. Housing in general has been top of mind more recently among 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 has been consulting with Kent County through its ARPA process. “It’s something everyone is very interested in.”
Ottawa County’s ARPA task force over the summer recommended using $8 million of ARPA funds to create a housing revolving loan fund. The county board also gave final approval to two affordable housing projects on Aug. 23 to accommodate a tight timeline from the projects’ developers, said county Fiscal Services Director Karen Karasinski.
The Ottawa County Board of Commissioners approved $1.5 million in ARPA grants to social services nonprofit Samaritas for the construction of 43 one-bedroom and 10 two-bedroom affordable housing units in Spring Lake. As well, the county board also approved nonprofit developer Dwelling Place’s request for $2 million in ARPA grant funding for a 46-unit apartment project in downtown Holland.
Both of the ARPA grants are contingent on Dwelling Place and Samaritas receiving state Low Income Housing Tax Credits in the April 2023 application cycle.
“A number of lenses were considered by the (Ottawa County ARPA Task Force), and affordable housing is an area that crosses multiple sectors,” Karasinski said, who is also a member of the ARPA task force. “It’s important to businesses and it kind of hits on many of the focus areas we’re looking at.”
It also wasn’t always clear that ARPA funding could be used for housing revolving loan funds. In July 2022, the U.S. Department of the Treasury announced a rule change to give municipalities more flexibility on how the funds are used for housing projects, Mooney said.
Using ARPA funding to create housing loans does come with some restrictions, including instituting an affordability period of at least 20 years for units, and price points for rental units that must be at or below 65 percent of the area median income, with a few exceptions, Mooney said.
Other ARPA-funded housing uses that municipalities are considering include new construction of units or supporting housing for homeless individuals, down payment assistance programs for new homeowners, and home repair programs to help preserve existing units, Mooney said.
“I have noticed there has been an openness to discuss other possible ways to impact long-term affordability and housing in general, which is nice,” Mooney said. “In the past, housing was something that maybe wasn’t as much in the forefront. Certainly in the pandemic it became even more obvious that housing stock is very important, especially when that’s the place where people needed to be staying to be safe. Talking about how to impact larger communities in a holistic nature has been something that more communities are willing to discuss.”