Affordable housing subsidies, in plain English.

Who this is for

You're new to affordable housing finance, or you've been adjacent to it and want to actually understand how the deal stack works. You're not looking for a 200-page treatise — you want enough to be conversant, and then pointers to the right resources for whichever program ends up mattering to your work.

This page is the orientation. The federal program pages are the deep dives. Read this, then click through to the programs relevant to your situation.

The core idea

Building affordable housing typically doesn't pencil with one source of money. Hard costs are high, rents are intentionally below market, and operating margins are thin. To make deals work, sponsors stack multiple "capital sources" — each with its own rules, eligibility, and tradeoffs.

The job of the affordable housing finance practitioner is to assemble that stack: figuring out which programs apply, in what amounts, in what order, and with what compliance obligations. The federal programs below are the most important pieces of the typical stack.

The federal program landscape

Programs by deal role

The primary equity sources

These are typically the largest single source in a capital stack — the "anchor" that the rest of the deal is structured around:

• LIHTC — 9% competitive for new construction; 4% non-competitive paired with tax-exempt bonds for preservation/rehab
• HTC — for certified historic structures, can be substantial
• NMTC — for mixed-use community development in qualified census tracts
• OZ — capital gains deferral benefit, sized to investor's gain basis

Gap loan / soft debt sources

These fill the gap between primary equity, conventional debt, and total development cost. Usually structured as deferred-payment or low-interest loans:

• HOME — flexible federal block grant, administered by states/cities
• HTF — federal, restricted to 30% AMI
• CDBG — federal, flexible community development
• FHLB AHP — competitive grants from your FHLB district
• State / local trust funds — varies by state; see state pages

Rental assistance / operating subsidy

These don't fund construction directly, but they provide the rental revenue that supports debt service and operations:

• Section 8 PBV / PBRA — project-attached vouchers and contracts
• Section 8 HCV — tenant-based vouchers that tenants bring to your property
• USDA Rural Section 521 RA — rental assistance for USDA Rural properties

Repositioning programs

These don't create new units but convert existing ones to long-term affordable contracts:

• RAD — public housing to Section 8 conversion; commonly paired with LIHTC for recapitalization
• Section 18 — demolition/disposition of obsolete public housing, often paired with tenant protection vouchers

What a typical capital stack looks like

To illustrate: a typical 100-unit new construction 9% LIHTC deal might include:

• 9% LIHTC equity (~$15-20M)
• Conventional permanent loan (~$8-12M)
• HOME or HTF soft second loan (~$2-4M)
• FHLB AHP grant (~$1M)
• State / local gap source (~$1-3M)
• Sponsor equity / deferred developer fee (~$1-2M)

A typical 200-unit preservation 4% LIHTC deal would substitute tax-exempt bonds for the primary debt and 4% LIHTC for the primary equity, often with smaller gap sources because the underlying property already has operating income.

Big developments worth knowing

OBBBA — the One Big Beautiful Bill Act, signed into law July 4, 2025 (P.L. 119-21) — made significant changes to the affordable housing finance toolkit. Highlights:

• Permanent 12% increase to the LIHTC per-capita (effective January 1, 2026) — expanding state allocation pools materially
• Reduced PAB financed-by test from 50% to 25% (effective for bonds issued after Dec 31, 2025) — significantly expanding 4% LIHTC deal capacity
• NMTC made permanent at $5B annual cap — removing the prior threat of program lapse
• Opportunity Zones extended with new Rural OZ category — expanding rural investment incentives

Novogradac has projected OBBBA could enable approximately 1.14 million additional affordable units over 2026-2035.

Where to go from here

Pick the program most relevant to your work and read the dedicated guide:

• If you're working on a new construction deal: start with LIHTC
• If you're working on a preservation/rehab deal: start with LIHTC (4% section) and RAD
• If you're working on a public housing redevelopment: start with RAD and Section 8
• If you're working on a historic rehab: start with HTC and LIHTC
• If you're working on mixed-use community development: start with NMTC and CDBG
• If you're working in a designated Opportunity Zone: start with OZ

Then read the relevant state page (all states →), the glossary (general / programs / AMI), and our flagship LIHTC deal structures guide.

This is educational reference material, not legal, tax, financial, or investment advice. Real deals require qualified counsel, tax advisors, and other professionals. See Disclaimer.