KOROR, Palau — The Palau Housing Authority (PHA) is facing a financial shortfall as demand for affordable housing continues to rise, with 261 pending applications totaling $14.5 million in costs.

In a letter to President Surangel Whipps Jr., PHA requested $500,000 in government funding to help address the backlog. The agency also noted that it is pursuing other funding sources, including assistance from the U.S. Department of Agriculture (USDA).

Last year, PHA received $500,000 through the supplemental budget RPPL 11-37, which funded eight housing projects—six new residential homes and two home renovations. Despite this support, the number of applicants continues to grow. PHA has urged the government to provide consistent annual funding to mitigate the backlog.

Adding to its financial challenges, PHA is struggling to meet its annual $500,000 loan payment to Mega Bank, stemming from a housing loan acquired in 2017. Initially, the loan carried a 2.4% interest rate, determined by the London Interbank Offered Rate (LIBOR) plus 1%. However, the transition from LIBOR to the Secured Overnight Financing Rate (SOFR) caused interest rates to spike to 6.2%, significantly increasing repayment costs.

“Our current cash inflow from loan proceeds amounts to $480,000, which is not sufficient to cover the Mega Bank loan debt and our housing programs,” PHA stated in its letter to Whipps.

The agency is seeking financial assistance to continue fulfilling its mandate of providing low-income housing options for Palauan families.