American Rescue Plan and Affordable Housing

The American Rescue Plan Act (ARPA) was first passed by the federal government on March 11, 2021 to bring economic aid caused by the COVID-19 pandemic. And funding could provide a big boost for affordable housing efforts. How? Read on to find out!

First, the Basics

This package distributed $1.9 trillion to states and cities across the United States. Minnesota has received $1.25 billion for the state government; $1.11 billion went directly to Minnesota counties, and $644 million went directly to 21 Minnesota cities. This one-time direct funding to counties and cities will allow our local governments to fund important community investments. You can read more about how we will advocate for ARPA funding during this legislative session on the state level here.

ARPA funding will be available over the next four years and must be used in support of communities that were hit hard by the pandemic. After community feedback and additional conversations with stakeholders, counties and cities have used that information to decide where to best put their allocated funding. Currently, many cities and counties have moved beyond community feedback and have put forward their plans with phase 1 allocated funding toward a variety of important social and infrastructure commitments. This essential federal funding will provide many opportunities to advance equity and create great strides in creating essential investments in community needs, like affordable housing.

Habitat volunteers raise walls at a local build site. Advocating for affordable homeownership is another great way for volunteers to advance Habitat's mission.

How ARPA Advances Affordable Housing

Affordable housing in Minnesota is becoming more of a luxury each year as prices continue to climb with incomes remaining stagnant. This has left many Twin Cities families with limited housing options that can meet their needs. This issue has continued to grow over the past decade, and with funding not able to keep up with the community’s needs, many cities are falling behind in their affordable housing goals.

However, there are solutions to this issue. If ARPA spending can support badly-needed affordable housing, there is an opportunity to start creating impactful change in Minnesota. From addressing homelessness to supporting homebuyers, allocating this funding towards producing and developing affordable housing could provide individuals with the security and stability of home.

Throughout the affordable housing spectrum, this funding could be vital in creating secure and accessible housing for families. However, while it is important to create secure and stable opportunities within rentals and transitional housing, we know that homeownership opportunities are unique in creating transformational, multi-generational change. Homeownership builds equity that can be passed on to the next generation, and it allows families to build roots in the community. With stable housing through homeownership, we have witnessed better health outcomes, better educational outcomes, and a greater connection within communities. Therefore, any investment in affordable housing must include an investment in homeownership.

Whether it is through ARPA funding towards the production of new affordable housing units or the creation of grants towards down payment assistance, there are many opportunities for our state and local governments to use this one-time funding to support potential homebuyers.

It’s Time to Invest More in Homeownership

According to Minnesota Housing Finance Agency, Minnesota is 40,000 housing units short of what it needs to keep up with the demand of the state’s population. This has left Minnesota with one of the largest housing shortages in the country, and the lack of available affordable housing has caused prices to skyrocket. The market is more competitive than ever. Homebuyers have found themselves submitting offers far over the asking price, skipping home inspections, and enduring grueling bidding wars just for the opportunity to buy a home—all on top of already high housing prices. It’s way past time for a big boost in affordable homeownership funding.

In addition to the largest housing shortage in the country, Minnesota also has one of the largest racial homeownership gaps. The opportunity for homeownership in communities of color has been made even less accessible due to the high cost of housing. After decades of racial discrimination in housing, we need new policies to start to reverse our horrendous homeownership gap. As a society, we created these racial disparities, and we need to be intentional in closing them.  

There’s good news! Currently, many Minnesota cities and counties have made commitments towards affordable housing with ARPA funding. Ramsey County and St. Paul jointly committed $74 million to affordable housing, and Hennepin County committed $46 million. While current commitments with phase 1 of ARPA towards affordable housing have been great, we hope to see more emphasis on homeownership in future funding allocations. Our region is badly behind in funding for affordable housing. But ARPA gives us an opportunity to do some catch-up. We hope to see our local and state governments continue to step up in support of the affordable housing needs within our communities through greater investments in affordable homeownership. Let's advocate together to make sure that happens!

Habitat supporters from across Minnesota meet virtually with lawmakers to advocate for affordable homeownership.

We hope you’ll raise your voice for affordable housing too by joining us at Virtual Hill Day on Friday, April 29. Learn more and sign up for this powerful, inspiring, and free event!