Housing availability and affordability remain critical challenges for communities across the nation. These challenges stem from various interrelated factors, including construction and development hurdles, the need for land use and regulatory modernization, infrastructure and workforce gaps and financing barriers.
To help leaders tackle these challenges, the National League of Cities and the American Planning Association released the Housing Supply Accelerator Playbook, a resource designed to support communities in navigating their housing supply challenges through a system approach. Expanding this effort, the Filling the Gap Tool: Unlocking Housing Finance focuses on tackling one of the most persistent barriers to housing development: access to financing.
Why Focus on Finance?
Financing challenges consistently emerge as significant barriers to housing development.
A key factor contributing to this challenge is the misalignment between what it costs to build housing developments versus what consumers can afford in the market. This challenge becomes more acute for affordable housing, where development costs far exceed what tenants or buyers can reasonably cover. This results in a persistent housing funding gap.
Understanding the Housing Funding Gap
Housing projects, whether through new construction or the preservation of existing housing, require financial planning. Developers estimate both the project costs and available funding sources. When projected costs exceed the available funding, a funding gap exists.
Project Costs – Funding Sources = Housing Funding Gap
Identifying and addressing this gap is critical to ensuring the financial viability of housing development projects. For projects aimed at serving low- to moderate-income households, subsidies are necessary to bridge this gap and keep units affordable. These subsidies may come from local, state, federal, private or other sources.
How Can the Filling the Gap Tool Help?
The Filling the Gap Tool can help cities to unlock finance opportunities to expand and preserve their housing supply.
This tool enables cities to play an active role in shaping the housing supply they envision, offering:
- An interactive dashboard with hundreds of downloadable funding opportunities at the state and federal levels;
- Actionable policy levers and cross-sector strategies for municipalities to facilitate development at the local level; and
- 150 municipal case studies showcasing funding solutions in action.
By utilizing the Filling the Gap Tool, local leaders can more effectively identify solutions to bridge their housing funding gap and meet their local housing supply needs. The tool provides interactive dashboards for local leaders to customize their search for finance opportunities and understand state-by-state constraints that may hinder or facilitate development. Understanding that the landscape of funding opportunities may change rapidly, NLC researchers plan to update the Filling the Gap Tool on a quarterly basis to provide local leaders with up-to-date solutions.
By learning from peer cities through case studies, local leaders can find references for success stories and best practices.
Below, see examples of housing programs and case studies in the Filling the Gap Tool (municipal populations sourced from 2020 Decennial Census).
Federal Program
Filling the Gap Resource
The Department of Housing and Urban Development (HUD)’s Pathways to Removing Obstacles (PRO) to Housing Grant awards grants to local governments that have documented significant housing needs. Local governments must demonstrate they have taken steps to identify, address or remove barriers to housing production and preservation. Barriers may encompass challenges related to zoning and land use, financial gaps, deteriorating infrastructure and community amenities and climate resilience.
Municipal Case Study
The City of Montgomery, AL (pop. 200,603) received a PRO Housing Grant from HUD to be utilized in West Montgomery along the National Historic Selma-Montgomery Trail. The City of Montgomery was awarded $3,581,160 to implement the program, using funds for affordable and accessible housing.
State Program
Filling the Gap Resource
Oregon’s Local Innovation and Fast Track (LIFT) Program aims to expand the state’s supply of affordable housing. Administered by the state housing finance agency, Oregon Housing and Community Services (OHCS), LIFT supports the funding of rental and homeownership developments. LIFT Homeownership program funds can be used to support the construction of new affordable homes for purchase and the conversion of existing nonresidential buildings into new affordable homes for purchase. The LIFT Rental program funds affordable housing developments that serve low-income Oregonians, specifically for historically underserved communities.
Municipal Case Study
In Hood River, OR (pop. 8,313), the 780 Rand Road Affordable Housing Development was awarded $15.1M in funds from the LIFT program and Low-Income Housing Tax Credit (LIHTC) program. All 130 units in the development are for individuals and families earning at or below 60% AMI.
Local Policy Lever
Filling the Gap Resource
Housing trust funds are versatile financial tools administered at the city, county or state levels to support various housing activities, including housing production, preservation and stabilization. The entity creating the fund defines the permissible uses and funding sources, tailoring the funds to meet local needs. Housing trust funds enable targeted investments that effectively address diverse local housing needs, ensuring the stability and growth of affordable housing stock.
Municipal Case Study
In Somerville, MA (pop. 81,045), the Somerville Affordable Housing Trust Fund (SAHTF)’s mission is to identify, evaluate and provide funding to create, preserve and support affordable housing. The Trust offers loans for housing development and funded activities must be directed towards households with incomes at or below 110% AMI.
Cross-Sector Strategy
Filling the Gap Resource
Local governments may cultivate strategic partnerships with regional Federal Home Loan (FHL) Banks to access dedicated funding and resources for local housing development. These banks extend financial support to member institutions like commercial banks, credit unions, savings banks, insurance companies and CDFIs, which address local needs such as housing, job creation and economic growth.
Municipal Case Study
In Traverse City, MI (pop. 15,678), the City Housing Commission is partnering with the FHL Bank of Indianapolis to develop the Parkview Apartments project. The Parkview Apartments project, receiving $300,000 in grants from the FHL Bank of Indianapolis, will construct 46 housing units for elderly residents with incomes less than 60% AMI.
Submitting Case Studies to the Filling the Gap Tool
Local leaders can submit their own case studies explaining how their city, town or village addressed the funding gap and successfully developed housing projects. These municipal submissions will be reviewed and potentially incorporated into the tool, serving as inspiration to other peer cities.
The Housing Supply Accelerator Playbook: Solutions, Systems, Partnerships
The Housing Supply Accelerator Playbook serves as a roadmap for local leaders, planners and private stakeholders navigating housing supply challenges. It adopts a systems approach to addressing housing supply issues, offering scalable solutions and promising examples from cities.
About the Authors
Filling the Gap Tool: Unlocking Housing Finance
Housing Supply Accelerator Playbook
Housing Supply Accelerator Field Guide
How Police Departments Can Become Community Mental Health and Violence Prevention Leaders
From the Event: Healthy Housing Learning Lab: Workforce Fireside Chat
