In October, the US Department of Transportation (DOT) released new guidance on how localities can use land and built structures originally purchased or enhanced with federal transit funds to support affordable housing development. DOT also provided new details on how residential projects near transit can leverage low-interest loans, guarantees, and lines of credit through the Transportation Infrastructure Finance and Innovation Act (TIFIA) and the Railroad Rehabilitation and Improvement Financing (RRIF) programs, which previously supported only transportation infrastructure projects.

Increasing development costs and the relatively slow return of transit ridership have impeded housing construction and threatened the financial stability of transportation agencies. These new federal initiatives could enable further housing construction near transit. Here, we provide some recommendations for local leaders to optimize their use of these programs.

Under the revised Interim Asset Disposition Guidance issued by DOT, assets acquired with federal assistance but no longer needed for their original purpose—such as land used for construction staging—can now be transferred at no cost to local governments, nonprofit organizations, or other third-party entities. The recipient must use these properties for transit-oriented developments, with at least 40 percent of housing units reserved for households with low or very low incomes. Previously, transit agencies seeking to transfer assets to other entities—including nonprofit housing agencies—for housing development had to pay back the federal monetary contribution, imposing a substantial cost on these potential projects.

DOT’s new rules related to TIFIA and RRIF allow transit-oriented development project sponsors to take advantage of much lower loan interest rates than available on the private market (4.66 percent compared with rates up to 13.6 percent on commercial loans as of this writing). Though the programs’ criteria are different (RRIF, for example, applies only to projects within a half-mile of a commuter rail or intercity rail station, while TIFIA can be used more broadly), both could reduce the cost of building housing near transit.

Read the full article about affordable housing from transit by Jorge González-Hermoso and Yonah Freemark at Urban Institute.