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The $1.2 trillion bipartisan infrastructure bill passed in 2021 was not intended to address housing issues.
The Infrastructure Investment and Jobs Act (IIJA) aims to reshape America’s transportation and energy infrastructure over the next decade by improving roads and bridges, promoting clean energy development, and investing in advanced manufacturing. It was. EV battery production, etc..
But transportation and housing are fundamentally intertwined, and as cities begin to invest in large-scale transportation projects that will reshape their cities for decades, it’s hard to think about how housing fits into the bigger picture. Of course. Homes with access to public transportation make housing more affordable because people can access jobs and services without the expense of a car. As a result, housing is densely packed near transit, leading to increased ridership.
“Access to transportation is one of the key aspects of housing affordability,” said Jonah Freemark, a housing policy researcher at the Urban Institute, a policy think tank, and author of a paper on the subject. said.Realizing affluent housing near transportation facilities”
That’s why transportation-focused housing advocacy groups like Freemark and the Biden administration are leveraging the $566 billion in transportation funding funneled to local governments through IIJA to address the current housing crisis.
In fact, in October, the Biden administration announced Much of the new funding from the infrastructure bill will come from the Department of Transportation (DOT) to help convert vacant office space into housing. In conjunction with Biden’s announcement, the DOT issued the following announcement: new guidance Makes the conversion of vacant office space to housing a project type that is eligible for certain types of financing.
“It was reassuring to see that at least the White House made that clear,” said Ron Gart, a real estate partner at the law firm Seyfarth Shaw and a member of the industry group Real Estate Roundtable. Ta. “In October they announced that they had these existing programs, but now they want to make it clear that they can be used for conversion.”
reversing sprawl
The disconnect between housing and transportation is a feature of the American system, given post-World War II sprawl and dependence on private automobiles. It’s hard to undo it.
“One of the challenges we face, both historically and currently, is that the majority of new housing is in low-density areas. approach,” Freemark said. “We’re seeing that especially now in places where new housing is actually allowed, like in Texas, but in suburban locations where it’s incredibly bad for the environment.”
Still, the shift in mindset is small but significant, as cities begin to consider density, walkability, and transit-centric planning as benefits. This is partly due to the severe housing shortage across the United States, as well as the recognition that cars have a negative impact on the environment.
“There are a wealth of opportunities for cities of all sizes to improve transportation access and connect it with high-density housing,” Freemark said.
For example, metropolitan areas like Seattle and Washington, DC, in conjunction with their local transportation authorities, have used both federal and local programs to encourage development in expanding their commuter rail networks. Ta. Smaller cities, such as Spokane, Washington, and Richmond, Virginia, are investing in rapid bus systems to increase bus frequency and reliability.
“Such cities need to think about how to marry investment in rapid bus routes with affordable housing,” Freemark said. “That’s the ideal.”
Some transportation planning departments have begun to use “vehicle miles traveled” (VMT) metrics as a measure of success or progress. In other words, low mileage is considered a virtue. So far, the only state DOT mandating VMT reductions for certain projects is California, but states like Colorado and Minnesota are allowing transportation agencies to reduce carbon emissions (where VMT is a key factor). ) and potentially reduce carbon emissions.
Bridging transportation and housing
At the federal level, new guidance from the DOT and several programs within IIJA are working to avoid the disconnect between transportation and housing.
The biggest hurdle is that infrastructure funding is generally directed to state or local transportation agencies, which are independent of local government agencies that specialize in housing. This could make it difficult for transportation and housing authorities to work together.
“So basically, different actors are making these choices,” Freemark said. “It’s even worse outside the big cities.”
At IIJA, through the Metropolitan Planning Organization (MPO), which oversees regional transportation planning, we introduced a housing collaboration plan and worked to link transportation and housing. The MPO coordinates among housing, transportation, and economic development agencies to develop a list of regional infrastructure projects. To channel federal funds, the MPO would prioritize projects that address other local issues, such as housing affordability and supply.
Another way the federal government has attempted to provide housing assistance through IIJA is through its many competitive grant programs.
Of the total amount of infrastructure funding available, approximately 75 percent is allocated directly to various federal agencies and 25 percent is allocated through competitive grant programs. DOT has at least $76 billion in funds to distribute through various grant programs and has considerable discretion over how to condition the distribution of funds.
According to the DOT, projects applying for funding through the Rebuild America’s Infrastructure with Sustainability and Equity (RAISE) program will be reviewed for housing impacts, among other criteria. This particular program was first created in 2009. $1.5 billion in the pot Towards 2024.
low interest loan
DOT’s primary means of financing housing development is through low-interest loans through the Transportation Infrastructure Finance Innovation Act (TIFIA) and the Railroad Reconstruction and Improvement Financing (RRIF) program to fund transit-oriented development. That’s $35 billion available. Two programs that have existed since the 1990s.
Both programs can provide funding to local governments as well as developers for eligible projects, including commercial and residential developments near transit. Office-to-residential conversions are considered an eligible project type under the new DOT guidelines.
TIFIA projects can be entirely private, but must have public infrastructure benefits and be available for funding. up to 49% of cost For projects with a minimum cost of $10 million. “They want some kind of public body,” Gert explained. “If you have all the zoning rights, that’s enough to show that the government supports this.”
RRIF projects, on the other hand, are typically public-private partnerships and must contribute to ridership and revenue for the associated transit station. This is something that most housing developments can claim. Although there is no minimum or maximum cost for projects eligible for RRIF funds, there are additional restrictions on how the funds can be used.
Under both programs, projects do not have housing affordability requirements, but may contribute to housing affordability through increased supply. But DOT’s new guidance allows transit agencies to transfer real estate to local governments and developers for free, especially for affordable housing projects.
While these programs do provide a boost to developers, it may take years to see the effects, and it will take some time for the funding to start rolling in. “The program has been in place for about two years now, and they’re actually learning as they go,” Gert said. “Currently, it takes about 15 months to take on a project.”
joint development
Transit agencies often underutilize land originally purchased in preparation for large infrastructure projects, which is managed by the Federal Transit Administration, a subsidiary of the DOT.
Although regional transportation funds cannot be used directly for housing construction, these sites may be transferred to local jurisdictions or private developers for housing development under certain conditions, known as co-development. there is. Eligible projects must be physically adjacent to transportation infrastructure, increase ridership, and return a portion of revenue to government agencies.
“DOT and GSA [General Services Administration] They are empowered to transfer their surplus property,” said Gert. “DOT allows transit agencies to transport land to local nonprofit or for-profit affordable developers.”
Sound Transit and WMATA, the respective transit agencies in the Seattle and Washington, D.C., metropolitan areas, have used these lands to build thousands of housing units near light rail stations. Sound Transit has been particularly active in recent years, promoting the development of 3,100 units near its Link stations, about 75% of which are affordable, the agency said.
However, many of these properties were acquired using federal funds, and transit agencies traditionally have to repay the federal government when disposing of land. Some agencies use leasehold or other structures to get around it, but it often acts as a barrier.
One little-known but potentially beneficial workaround was introduced in 2022 through the National Defense Authorization Act (NDAA), according to a Freemark report. The NDAA includes options that allow regional transit agencies that rent or sell unused land for affordable housing development to avoid repayment obligations to the federal government.
Overall, DOT has 21 different programs, each with its own criteria for funding different types of development. As such, there could be a gradual shift in the federal government’s priority focus on housing as agencies prioritize housing-related projects.
“Even the DOT wants to have areas where the city has parking lots, and they lease that parking lot as land to a developer, and the developer builds an apartment building,” Gert said.
Chava Gourarie can be reached at cgourarie@commercialobserver.com.
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