Less Paperwork, More Projects: Streamlining applications for Federal funding in housing development
U.S. housing and planning officials have identified a series of roadblocks that slow down or prevent their cities from being flush with affordable units. In particular, the paperwork is simply too complicated.
Existing federal rules make filing for Department of Housing and Urban Development (HUD) funds challenging. National Environmental Policy Act (NEPA) compliance requires one set of paperwork, National Register of Historic Places mandates require another, on top of the paperwork requesting funds. Outside of compliance rules, applications for funding regulations need their own paperwork and require status reports throughout the project.
Opportunity
The programs meant to create housing abundance have instead created a complex network of paperwork that is redundant, rigid, and discouraging. Let’s narrow our lens, and consider how developers use the Low-Income Housing Tax Credit (LIHTC) in particular. Developers may pull together as many as 11 sources of funding for a single project, which they are encouraged to do. Many state Qualified Allocation Plans prefer projects that leverage other government funding sources outside of the LIHTC.
But it costs money to make money. According to a 2018 Government Accountability Office report, developer fees were about 10% of the total costs for both new construction and rehabilitation projects. In addition to literal fees, sourcing and applying for diverse funding takes time. A 2021 Terner Center report identified “lack of alignment of deadlines,” multiple application rounds, mismatched priorities (“the city elected to disburse capital funds early in the process to help the project be competitive for state funds, while the housing authority’s approach was to prioritize project “readiness”), and contrasting requirements as massive time sucks that delay critical housing projects.
Plan of Action
Some states already streamline allocation from multiple funding sources to truncate development timelines and contain costs.
In Pennsylvania, a single entity administers multiple programs as a “one-stop shop” – a single application for a nine percent LIHTC automatically marks the applicant for HOME and National Housing Trust Funds, turning three applications into one. The Pennsylvania Housing Affordability and Rehabilitation Enforcement (PHARE) program also consolidates applications: Applying for a four percent LIHTC credit? You are also automatically eligible for other PHARE-distributed funds, like the Realty Transfer Tax and Marcellus Shale Fund. All of the sources that Pennsylvania Housing Finance Authority (PHFA) allocates, it does so in-house and with nearly-identical requirements. Because of this optimization, PHFA can award developers the “optimal mix of funding” in a single application.
Other states consolidate applications to further streamline funding processes. In Minnesota, the state has consolidated multiple housing resources within a single application process. This so-called “Consolidated RFP” has turned $298.9 million of state investment into $883 million in housing development activity, representing over 5,074 affordable units.
If states are able to put these innovations into place, then so should the federal government. The best place to start is HUD. Housing development grants and other affordable housing programs are already centralized at HUD, making it a natural fit for updated practices meant to distribute those programs.
Recommendations
Recommendation 1. Create a federal one-stop shop for affordable housing investments.
In FY23, there were 40 unique HUD funding opportunities, each requiring its own application. About half of these grants are disbursed to individuals seeking assistance for repairs or other programs. The other half, like the Choice Neighborhoods Implementation program or Capital Fund at Risk program, are aimed at communities and developers. In addition to HUD, other agencies earmark or leave open grants and funding opportunities for housing developments. To reduce friction for developers applying to multiple funds, HUD should look to Pennsylvania and Minnesota and create a lean interagency working group to consolidate applications.
This working group would have two goals:
- Enumerate all federal-level housing development grants and funds in a given fiscal year.
- Create a minimum viable universal application.
The first goal would empower HUD to be the keeper of all knowledge regarding housing development grants, which it does not currently do. This makes it easier to capture information about how these disparate grant opportunities are used across the country (something that the Government Accountability Office is extremely interested in). By cataloging developer-level grants, HUD would be a single source of information on Capital Magnet Fund, National Housing Trust Fund, public housing operating funds, and myriad other funding sources.
Recommendation 2. Align requirements and deadlines across grants and funds.
With a minimum application in place, the working group should then align the minimal amount of excess application material required to make an application competitive for the biggest number of grants. This would decrease the burden for developers submitting multiple applications, as well as federal grantmakers reading and grading applications. The working group should consolidate deadlines (or even consider taking applications in limited waves) to accommodate the universal application process.
Recommendation 3. Empower staff to award responsibly.
When more established and active, the working group should empower members to award “optimal mix of funding” to applicants. If an applicant was unaware they qualified for an additional grant, awarding staff should take reasonable action to submit the applicant into the process for the additional grant. With the universal applications, this would require minimal, if any, additional work on behalf of the working group staff or submitters.
Conclusion
Developers, funders, and the bureaucratic teams that sign off and disburse funding — everybody hates paperwork. Opening access to funds does not have to require more person power, as exemplified in the states that use consolidated applications. That access, paired with more streamlined application paperwork, would cut down busy work for developers and get them to what they do best fast: build.
This idea of merit originated from our Housing Ideas Challenge, in partnership with Learning Collider, National Zoning Atlas, and Cornell’s Legal Constructs Lab. Find additional ideas to address the housing shortage here.