When Ovation Development hosted a groundbreaking on April 6 for a new affordable housing development for seniors in Clark County, Sen. Catherine Cortez Masto (D-NV) was on site to celebrate.

Since she’s arrived in the U.S. Senate, she’s been worried about housing. The new development is urgently needed in a county that estimates it is 85,000 units short of demand for affordable housing.

From Cortez Masto’s perch on the Senate Banking, Housing, and Urban Affairs Committee, she has sat through hearing after hearing examining the lack of affordable housing supply across the nation, from challenges finding financing to the cost of development. She also has spoken to stakeholders across the state, who have described devastating shortages.

The new project, expected to provide 195 units upon completion in 2025, was emblematic of the level of investment affordable housing developments need. Ovation used funding from the 2021 American Rescue Plan, Clark County and private sources including the Federal Home Loan Bank of San Francisco. 

As Cortez Masto spent her first term investigating the housing crisis, she discovered an alarming fact about the Federal Home Loan Bank of San Francisco, whose mandate includes funding affordable housing projects in California, Nevada and Arizona.

In 2021, she said, California received $37 million in FHLBank grant funding for affordable housing projects. Nevada received no grants. In 2022, the state got $1.9 million.

“Nevada was getting nothing!” Cortez Masto said in an interview, exasperation evident for the typically measured senator. “So I started reaching out to them and inquiring what was going on. I started talking to their president, [even] showed up at one of their board meetings on the phone, and said I need to know what's going on here.”

Her pressure campaign worked. After she introduced legislation targeting the FHLBank system and continually working with bank leadership, the FHLBank of San Francisco announced in 2022 that it would create a Nevada Targeted Fund, setting aside a pool of grants open only to Nevada applicants, and give $500,000 to the Nevada Housing Coalition to boost affordable housing development capacity in the state. The application opened in January, and the bank announced it would grant $4.5 million to a pool of eight Nevada applicants for a geographically diverse set of projects.

The Nevada Targeted Fund is the first ever state-specific fund in the FHLBank system, potentially setting a precedent for smaller states such as Nevada that experts nonetheless agree faces one of the harshest affordable housing crises in the country.

“Our housing deficit is so severe that we need to start moving the needle,” said Christine Hess, the executive director of the Nevada Housing Coalition. “These funds are tremendously important. And combined with the capacity building that the bank has invested in [the state], the future in Nevada really is brighter.”

A first-of-its-kind fund

The FHLBank of San Francisco is one of 11 regional collectives that make up the FHLBank system. Its members are banks, credit unions, insurance companies and other financial institutions that meet a certain threshold for mortgage-related assets. The members pledge collateral to their regional FHLBank, which in turn receives funding from the bank that they can lend to their core base.

As a whole, the system is regulated by the Federal Housing Finance Agency, which ensures that each regional bank follows its mandate from a 1989 law requiring 10 percent of earnings be kept within the FHLBank system to be pledged to affordable housing. The FHLBank of San Francisco typically dedicates between 11 percent and 14 percent to affordable housing through its Affordable Housing Program (AHP), according to senior vice president of public affairs Jeremy Empol.

Hess said this funding is often the “last money in” and gets an affordable housing project, for which developers usually cobble together six to nine different funding sources from public and private investments, over the finish line. 

Empol said Cortez Masto began connecting with the bank’s president in 2021, bringing her attention to the funding deficit in Nevada. In May 2021, she introduced legislation to double the amount of funding for affordable housing that FHLBanks are responsible for and expand its grant offerings; in July, she and Sen. Jacky Rosen (D-NV) sent a letter to the bank president expressing “dismay” at the bank’s neglect toward Nevada and requesting the creation of a targeted fund.

“[I] put together my legislation and said if you're not going to work with me, then I'm going to actually push through this legislation and force you to really take a look at this,” Cortez Masto said. “That's how it really started.”

Prior to the creation of the targeted fund, Nevada had struggled to compete against California developers, in particular, because the state’s affordable development community was small and lacked the sophistication of more established groups – particularly for projects serving people experiencing homelessness, a priority of the bank. 

Within the FHLBank of San Francisco’s region, Nevada has the fewest nonprofit organizations working on affordable housing, Eric Cicourel, the FHLBank of San Francisco’s community investment officer, said. The lack of a robust affordable housing development community limited the number of applications the bank received. Cicourel said the AHP typically receives five or six applications from Nevada; this year, the AHP received 125 applications nationwide.

“This lack of capacity is, of course, going to affect the total amount of affordable housing produced in this state,” Cicourel said.

Bank officials and Hess said the fact that the targeted fund received eight applications is a significant improvement, and pointed to the investment in the Nevada Housing Coalition as part of the long-term goal of spurring growth of the state’s affordable housing development community. Hess said her organization has already used those funds to train 300 participants in affordable housing development, and subgranted out $200,000 to two projects, putting them close enough to their funding goals to apply to the AHP.

Cortez Masto’s interest in the subject also has helped drive awareness.

“We do have to give credit to the senator … to get everyone to this point where the application numbers can increase so we know that those funds are going to be fully utilized,” Cicourel said, citing her office’s relationships with tribal nations in particular. “She was a big partner with us in getting the word out.”

Housing’s legislative future

In a slow-moving and otherwise divided Senate, housing affordability — from dense blue metros to red rurals — has emerged as an area of bipartisan concern, if not yet collaboration. States including Nevada benefit from funding for housing affordability in the 2021 American Rescue Plan and from the Low-Income Housing Tax Credit, but developers, advocates and lawmakers alike want a greater federal footprint in housing, whether it be through investment, tax policy or increased oversight of the financial system that governs affordable housing development.

The Banking, Housing and Urban Affairs Committee has held several hearings on the topic. Cortez Masto has trained her sights on the beleaguered Federal Housing Finance Agency, sending its director a letter asking for a stringent review of the FHLBanks system and its commitment to affordable housing. Committee chair Sen. Sherrod Brown (D-OH) sent his own letter to the FHFA last week asking for more information about FHLBanks’ lending to failed banks like Silicon Valley Bank. And several members of the delegation have tried to put pressure on the Department of Housing and Urban Development to update its funding formulas for housing choice vouchers, saying its outdated figures are providing insufficient allocations to Nevada’s low-income population.

But in the meantime, bank officials and advocates expect the Nevada Targeted Fund to have a real impact, both in terms of financing projects and injecting confidence into the affordable housing market in Nevada.

“The Federal Home Loan Bank money is not going to pull us out of the crisis,” Hess said. “But it is absolutely a resource that we want to make sure comes also to Nevada.”

And, as Cortez Masto continues to use her committee perch to find solutions, she said she expects the Nevada Targeted Fund and the FHLBank money for capacity building to be an effective tool toward bringing more projects like the Ovation Development senior housing over the financing finish line and open to residents.

“I want to see more of that,” Cortez Masto said. “I want to see more of that funding coming into our state and being utilized for affordable housing.”