Housing advocates are hoping new federal funding rules will help boost construction of new multifamily homes across New Hampshire.

The recently passed 21st Century ROAD to Housing Act contains a number of measures designed to make it easier to build and buy homes across the U.S., from new first-time homebuyer pilot programs to raising the limits on how much capital banks can invest in affordable housing projects.

Also tucked into the 50-page act is a provision that gives states and local governments expanded authority to use Community Development Block Grant funds for construction of new housing, as opposed to past rules that restricted CDBG funds to mostly housing rehab projects.

Separately, the U.S. housing act also introduces a new “performance based” funding formula that financially rewards or punishes local community development agencies based on the number of new housing units built with CDBG funds.

For New Hampshire, the total amount of CDBG funds involved across the state isn’t a lot – usually around $15 million a year – considering the billions of dollars needed to build enough new housing to ease the current housing shortage.

But officials say CDBG funds rarely fund the entire cost of various development projects across the state.

Instead, grant money is typically used to supplement investments from other sources to get development projects off the ground.

At a time when it’s hard for many nonprofit and for-profit entities to raise capital for projects, a five- or six-figure CDBG infusion can make the difference between financial success or failure for many development proposals, officials say.

So in that regard, the new rule giving states and local entities more flexibility to use CDBG funds for new multifamily housing projects has the potential to add hundreds of new units per year in New Hampshire.

“It’s a big win for housing,” said Elissa Margolin, director of the Initiative for Housing Policy and Practice at St. Anselm College. “A consistent problem for developers has been trying to assemble a capital stack that works and that keeps up with rising construction costs. This addresses that issue.”

Not Clear If Extra Funds Will Help

Even relatively small infusions of CDBG funds can help some housing projects get off the ground, Margolin noted.

Jack Ruderman, legislative affairs advisor at the New Hampshire Housing Finance Authority, also known as New Hampshire Housing, agreed that allowing CDBG funds to more regularly be used for new construction is a big plus.

“It’s a very positive move,” he said. “It’s a fantastic development.”

But Robert Tourigny, executive director of NeighborWorks Southern New Hampshire, a nonprofit community development organization, questioned whether the new CDBG funding flexibility will be as beneficial as some think.

He noted the 21st Century ROAD to Housing Act doesn’t appropriate any extra money to CDBG programs around the country.

Instead, it merely says that up to 20 percent of existing funds can be used for new housing construction

The net result, he warned, is that other traditionally CDBG funded projects, such as construction of new child-care centers or rehabbing existing elderly housing facilities, may see their funding cut in coming years to make way for new housing initiatives.

“There’s just a new demand for the same amount of financial resources,” he said. “If the [new housing law] doesn’t expand the dollars available, what use is it?”

Who Gets the Money?

Currently, federal CDBG funds are divided into two general categories in New Hampshire.

One is for statewide CDBG projects, administered by the New Hampshire Community Development Finance Authority, amounting to about $9 million a year.

Since 2003, the CDFA has distributed about $213 million in community development block grants across the state, according to the agency.

Over the decades, funds have been earmarked for a wide variety of community, economic, energy and mostly housing-upgrade projects, according to the state agency.

Katy Easterly Martey, executive director the CDFA, said she welcomes the new rule giving states more flexibility to directly deploy CDBG funds for new housing construction.

“We’re very excited,” she said. “This gives us more flexibility to use funds for [additional housing].”

The other CDBG funding category covers so-called “entitlement communities,” which receive their federal block-grant money directly from the U.S. Department of Housing and Urban Development (HUD).

Based on population counts and other demographic factors, New Hampshire’s five entitlement communities are Manchester, Nashua, Portsmouth, Dover and Rochester.

So far this fiscal year, those communities have received about $4 million in CDBG funding, though they’re technically entitled to more funds in any given year, according to data.

‘Fairly Modest Carrot’ for Portsmouth, Others

As for the new “performance based” funding formula, the 21st Century ROAD to Housing Act has left it to HUD to develop the specific metrics and rules for the housing incentives program.

But the act basically says future CDBG funds for entitlement communities could be increased or decreased by 10 percent depending on how much new housing they produce via block grants.

The incentive program does not apply to the statewide CDBG program administered by the New Hampshire Community Development Finance Authority.

New Hampshire Housing’s Jack Ruderman expressed doubt that the performance-based formula will amount to much new construction after it’s implemented within three years.

“It’s a fairly modest carrot,” he said of the incentives involved. “It’s not nothing. But it isn’t a lot of money. Whether you get a little more or less [CDBG] money, it’s not dramatic. It’s not that big of a deal.”

One thing that’s missing from the 21st Century ROAD to Housing Act: zoning mandates on local governments.

Brodie Deshaies, a legislative advocate at the New Hampshire Municipal Association, said he hasn’t yet reviewed the act close enough to comment in detail about all its provisions.

But he made clear his group would have adamantly opposed any moves by the feds to force local governments to alter their zoning rules to boost housing construction.

“Our members want autonomy and control over zoning issues,” he said.

As it is, the new federal act steers well clear of any zoning mandates, said Michael Wallace, legislative director for housing, community and economic development at the National League of Cities, whose members include the NHMA.

“We wouldn’t have endorsed the bill if it had imposed unfunded liabilities on local governments or if it pre-empted local rules,” he said. “Since it doesn’t do those things, we supported the act.”