New program streamlines affordable housing development funding

December 27, 2011
| By Rob Davies |
Text Size:

Getting federal funds for affordable housing projects should be faster, cheaper and easier for Michigan affordable housing developers thanks to a new program that could become a model for the rest of the country.

Last month, the Michigan State Housing Development Authority launched a pilot program that aims to simplify the development process for low-income housing tax credits, rental subsidies, federally backed loans and other incentives designed to encourage construction of affordable housing. The new initiative, which was established with the U.S. Department of Agriculture Office of Rural Development and the U.S. Department of Housing and Urban Development, replaces a system that was time-consuming, inefficient and costly.

Under the old system, affordable housing developers often approached the funding process without a full understanding of the subsidies or incentives that might be used or obtained for a project. Additionally, owners and developers who applied for federal monies to subsidize or finance affordable housing projects could not receive “overlapping funds” — meaning that their total package would not exceed eligible costs.

But each federal agency had its own review process, requiring developers to submit to multiple reviews from different agencies with differing requirements. Although obtaining federal funds for these projects was necessary, the approval process caused unnecessary delays.

The White House stepped in, requesting that federal agencies and state housing finance agencies better coordinate their programs in order to streamline the development and financing of affordable housing development. Michigan stepped up, reaching out to partner with HUD and USDA-RD to establish a new program that will likely set the pace for the rest of the country.

The result? Michigan developers now submit to one review process, address one set of criteria and undergo one review. MSHDA coordinates with the appropriate federal agencies to get approvals. Underwriting standards are more uniform and communicated in advance.

Developers will have a better understanding of the maximum costs they will be eligible to incur and what federal funds they will receive, from development fees and construction costs to consulting fees, builder overhead and profit. Better aligning all program requirements could trim the wait time significantly.

That’s good news for affordable housing developers and renters alike. Developers will be able to save time, money and frustration with this single-stop approach, which MSHDA says will allow the state to take “an important step forward” in providing affordable housing to the most “rent-challenged and at-risk families.”

There’s no denying the need — in fact, the National Low Income Housing Coalition characterized it as “staggering.” Demand continues to outpace the supply at a time when unemployment remains high and poverty is on the rise. The coalition estimated a national shortage of more than 6 million “affordable and available” rental homes for households with extremely low income — which translates to a mere 39 rental homes available for every 100 willing renters.

MSHDA’s new initiative will likely become the model for the rest of the country. Such leadership and innovation are commendable — and deserving of imitation.

Rob Davies is a partner at Warner Norcross & Judd LLP who concentrates his practice in real estate law. He can be reached at

Recent Articles by Rob Davies

Editor's Picks

Comments powered by Disqus