Below-market financing of affordable housing development overview
Below-market financing typically involves providing funds at a lower rate of interest (or with lower fees) than would be required from a market-rate funder. Compared with capital subsidies, below-market loans may have a much smaller impact on affordability on a dollar-for-dollar basis since the loans ultimately must be repaid. However, funds loaned out at a low interest rate can be recycled to help subsequent borrowers as the funds are repaid.
This section reviews some of the key considerations involved in creating and administering a below-market debt financing program.
Varies depending on the source of the funds, but may include the local department of housing and community development (for HOME and CDBG allocations or locally-generated funds), the state or local housing finance agency (for tax-exempt bond proceeds or housing finance agency reserves), or the regional Federal Home Loan Bank (for Affordable Housing Program funds or Community Investment Program advances).
Increasing the affordability of rental housing
Preserving the existing stock of market affordable rental housing
Reducing homelessness and meeting the emergency needs of homeless individuals and families
Increasing access to sustainable homeownership
Expanding affordable housing in resource-rich neighborhoods