The affordable housing shortage in the United States has reached crisis levels. The National Low Income Housing Coalition estimates a shortage of 7 million affordable housing units, and the federal government has responded with unprecedented investment through the Inflation Reduction Act, Bipartisan Infrastructure Law, and annual appropriations. For developers, nonprofits, and local governments, this creates a once-in-a-generation opportunity to access federal housing funding. Search active housing grants to find opportunities that match your project.
Major Federal Housing Funding Sources
Major federal programs funding affordable housing in 2026
| Program | Agency | Award Range | Best For |
|---|---|---|---|
| HOME Investment Partnerships | HUD | $50K–$5M | Affordable housing construction and rehabilitation |
| CDBG Community Development Block Grant | HUD | $50K–$10M | Community development, housing rehab, infrastructure |
| Housing Trust Fund | HUD/Fund | $500K–$5M | Extremely low-income housing (30% AMI or below) |
| Section 202 Senior Housing | HUD | $500K–$25M | Housing for seniors 62+ with low incomes |
| Section 811 PRAC | HUD | $500K–$15M | Housing for persons with disabilities |
| Rural Housing Repair Loans/Grants | USDA | $3K–$50K | Home repairs for low-income rural residents |
| Multi-Family Housing Direct Loans | USDA | $250K–$10M | Affordable rental housing in rural areas |
| Low-Income Housing Tax Credit (LIHTC) | Treasury/IRS | $500K–$20M+ | Equity for affordable rental development |
| New Markets Tax Credit | Treasury/IRS | $5M–$50M+ | Housing in low-income census tracts |
HOME Investment Partnerships
HUD
$50K–$5M
Affordable housing construction and rehabilitation
CDBG Community Development Block Grant
HUD
$50K–$10M
Community development, housing rehab, infrastructure
Housing Trust Fund
HUD/Fund
$500K–$5M
Extremely low-income housing (30% AMI or below)
Section 202 Senior Housing
HUD
$500K–$25M
Housing for seniors 62+ with low incomes
Section 811 PRAC
HUD
$500K–$15M
Housing for persons with disabilities
Rural Housing Repair Loans/Grants
USDA
$3K–$50K
Home repairs for low-income rural residents
Multi-Family Housing Direct Loans
USDA
$250K–$10M
Affordable rental housing in rural areas
Low-Income Housing Tax Credit (LIHTC)
Treasury/IRS
$500K–$20M+
Equity for affordable rental development
New Markets Tax Credit
Treasury/IRS
$5M–$50M+
Housing in low-income census tracts
HOME Investment Partnerships Program
HOME is the largest federal block grant for affordable housing. Administered by HUD, it provides formula funding to states and localities that then award grants or loans to developers, nonprofits, and homebuyers. HOME funds can be used for new construction, acquisition, rehabilitation, and tenant-based rental assistance.
KEY FACTS
- Funding distributed by formula to states and participating jurisdictions
- Requires 25% local match for rental projects
- Income restrictions: households at or below 80% AMI for ownership, 65% AMI for rental
- Must meet housing quality standards and Davis-Bacon wage requirements for new construction
- States and localities typically run annual competitive rounds — check your local HUD field office
Many localities set aside HOME funds specifically for community housing development organizations (CHDOs). If you are a nonprofit, check whether your jurisdiction has a CHDO set-aside — competition is often lower.
Housing Trust Fund
The Housing Trust Fund (not to be confused with state-level housing trust funds) is a dedicated federal fund created in 2008 and capitalized through a small portion of Fannie Mae and Freddie Mac earnings. It is the only federal program exclusively targeting extremely low-income housing — households earning at or below 30% of Area Median Income (AMI), often including people experiencing homelessness.
WHO CAN APPLY
- States and state-level housing finance agencies (most HTF allocation flows through states)
- Private developers and nonprofits in partnership with state housing agencies
- Grants can fund acquisition, new construction, and substantial rehabilitation
- Must commit to long-term affordability (minimum 30 years for rental)
- At least 90% of funds must benefit very low-income households (50% AMI or below)
Combine Housing Trust Fund with Low-Income Housing Tax Credit (LIHTC) and other sources. HTF can fill financing gaps for projects serving extremely low-income tenants that LIHTC alone cannot support.
Section 202 and Section 811: Senior and Disability Housing
HUDs Section 202 Capital Advance program provides capital grants to nonprofit developers to build affordable housing for seniors (62+), while Section 811 provides support for persons with disabilities. These are among the most favorable housing programs: capital advances do not require repayment as long as the project serves eligible residents for 40 years.
Section 202 vs Section 811
Seniors 62+
Non-elderly persons with disabilities
Up to $25M per project
Up to $15M per project
Project rental assistance contract (PRAC) covers operating costs
PRAC also available
50% AMI maximum
50% AMI maximum
None
None — highly subsidized
Independent living, congregate, assisted living
Independent living, group homes
USDA Rural Housing Programs
The U.S. Department of Agriculture funds affordable housing in rural communities through multiple programs administered by USDA Rural Development. These programs are specifically for rural areas — defined as towns with populations under 35,000 and outside metropolitan statistical areas.
USDA Rural Housing Program
| Program | Type | Award Range | Key Features |
|---|---|---|---|
| Single Family Housing Direct | Loan | $10K–$300K | 0% interest loans for very low-income homebuyers in rural areas |
| Single Family Housing Repair | Grant/Loan | $3K–$50K | Grants for very low-income seniors to repair homes; loans for others |
| Multi-Family Housing Direct | Loan | $250K–$10M | Direct loans to finance affordable rental housing in rural areas |
| Multi-Family Housing Preservation | Grant | $250K–$5M | Rehabilitation and preservation of existing affordable rental |
| Community Facilities | Grant/Loan | $250K–$250K+ | Housing-related facilities, transitional housing, homeless shelters |
Single Family Housing Direct
Loan
$10K–$300K
0% interest loans for very low-income homebuyers in rural areas
Single Family Housing Repair
Grant/Loan
$3K–$50K
Grants for very low-income seniors to repair homes; loans for others
Multi-Family Housing Direct
Loan
$250K–$10M
Direct loans to finance affordable rental housing in rural areas
Multi-Family Housing Preservation
Grant
$250K–$5M
Rehabilitation and preservation of existing affordable rental
Community Facilities
Grant/Loan
$250K–$250K+
Housing-related facilities, transitional housing, homeless shelters
Tax Credit Programs: LIHTC and New Markets
The Low-Income Housing Tax Credit (LIHTC) is the engine of affordable housing production in America, driving approximately 90% of all new affordable rental housing. Administered by state housing finance agencies, LIHTC provides dollar-for-dollar tax credits that can be sold to investors to raise equity for development. While not a grant, it is the most powerful financial tool available for affordable housing.
HOW LIHTC WORKS
- State housing finance agencies allocate 9% and 4% tax credits annually
- 9% credits are competitive and can support new construction without other subsidies
- 4% credits are used with tax-exempt bonds, typically for acquisition/rehab or preservation
- Projects must serve households at 60% AMI or below for at least 30 years
- Syndication to investors provides equity — typically 70-80 cents per dollar of credit
LIHTC is administered at the state level. Each state hfa has its own qualified allocation plan (QAP) with different priorities. Research your state hfa is QAP to understand which projects win — affordable housing near transit, in high-opportunity areas, or serving special needs often receive priority.
The New Markets Tax Credit (NMTC) provides a 39% tax credit over seven years for investments in low-income census tracts. While not exclusively for housing, NMTC is frequently used in mixed-use developments that include affordable housing, especially in urban neighborhoods undergoing revitalization.
CDBG and Other Cross-Cutting Programs
The Community Development Block Grant (CDBG) program provides flexible funding to states and localities for community development, including affordable housing. While CDBG is not exclusively a housing program, housing activities are an eligible use, and CDBG funding can support rehabilitation, infrastructure improvements, and neighborhood revitalization that enables housing development.
CDBG HOUSING-ELIGIBLE ACTIVITIES
- Housing rehabilitation: single-family and multi-family
- Acquisition of property for affordable housing
- Demolition of blighted structures
- Public infrastructure that supports housing development
- Lead-based paint hazard removal
- Housing counseling and fair housing activities
- Assistance to homeless individuals and families
Other federal programs that can fund affordable housing include the Home Investment Partnerships (HOME) program mentioned above, the Emergency Solutions Grant (ESG) for homelessness, the Continuum of Care (CoC) program, and the Housing Choice Voucher program for rental assistance.
Building a Strong Application
Affordable housing grants and loans are highly competitive, especially for new construction. Reviewers evaluate applications based on demonstrated need, organizational capacity, project readiness, and evidence-based development approaches.
APPLICATION ESSENTIALS
Common Application Mistakes
Strong vs Weak Applications
Data-driven — "15% of renters pay more than 50% of income"
Vague — "housing needed in community"
Zoning approved, environmental clearances complete
Site control only, no entitlements
Detailed, with comparables and cost justification
Round numbers, missing soft costs
Relevant past projects with outcomes documented
List of activities without results
Multiple funding sources committed or in hand
Relying entirely on one program
Recent Funding Opportunities
Federal housing funding is posted throughout the year through various agencies and state partners. Major funding announcements in 2025-2026 include increased Housing Trust Fund allocations, expanded CDBG formula funding, and new Inflation Reduction Act programs for energy-efficient affordable housing.
Key Federal Agencies and Resources
WHERE TO FIND FUNDING
- HUD Exchange (hudexchange.info) — HOME, CDBG, Section 202, Housing Trust Fund
- USDA Rural Development (rd.usda.gov) — Rural housing programs
- State Housing Finance Agencies — LIHTC allocations
- Grants.gov — Search by agency and eligibility
- National Housing Trust Fund (nationalhousingtrust.org) — Policy and advocacy
Frequently Asked Questions
Explore More Tools
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