What is an effective method to calculate the federal share on an affordable housing project?

When calculating the federal share of an affordable housing project, municipalities should consider what each project hopes to achieve and the various federal and non-federal funding that might be available for each project. The federal share of an affordable housing project will often depend upon multiple factors, including but not limited to the goal of the affordable housing project, the number of federal and non-federal funding sources available, and federal, state, and local guidance that will affect how funding sources can be used, and the extent of funding that can be applied to a given project.

Local governments have several funding streams to consider when calculating local and federal shares on an affordable housing project. The structure of federal financing for affordable housing allows for the “braiding” of multiple streams of federal, state, and local funding for the same project (multiple funding sources are used while each individual source used is separately tracked and reported), and in some cases, multiple federal and non-federal funding sources can be “blended” for a single project (multiple funding sources are comingled together and may be tracked and reported on as a single stream of funding).[1] The following steps can be used by a municipality as guidance to determine which federal funding to pursue:

1. Assess local housing needs and establish clear priorities.
2. Take inventory of existing housing programs and local partners. This step includes confirming project eligibility as not all funding streams will support particular projects. While most federal funding will require some form of a 25% match, that too, can vary. It is critical to document the scope of the project and its components and if needed, reach out to funders to ask for confirmation of funding requirements to build out a project budget with match requirements.

These steps may determine which federal funding programs are best suited to the affordable housing project being pursued.[2] Each locality has different housing needs that are affected by numerous factors such its population composition, and current housing supply.[3] Municipalities should review the following non-exhaustive list of federal funding programs for housing with their unique concerns in mind:

• Low-income housing tax credit (LIHTC)
• Mortgage Revenue Bonds
• Community Development Block Grants (CDBG)
• HOME Block Grants
• Housing Trust Funds
• Homeless Assistance Grants
• Housing Opportunities for Persons with AIDS (HOPWA)
• Native American Housing Block Grants (NAHBG)[4]

The various grant programs have a shared goal of providing affordable housing and a suitable living environment for low and moderate-income persons but differ in what benefits and target populations they cover.[5] The programs also offer significant opportunities for collaboration between state and local governments.

In addition to traditional federal housing financing programs, Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) may potentially be utilized to further invest in affordable housing. According to the Final Rule:

[d]evelopment, repair, and operation of affordable housing and services or programs to increase long-term housing security” is an enumerated eligible use to respond to the negative economic impacts of the pandemic on households and communities.[6]

To assist recipients in the utilization and maximization of funds, the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development (“HUD”) developed an Affordable Housing How-to Guide summarizing the guidance in the final rule around investing in affordable housing as well as recommendations for layering CSLFRF with longstanding federal affordable housing programs, and state funding streams.[7] Potential project categories include but are not limited to flexible funding for new construction and substantial rehabilitation of affordable housing, rehabilitation and adaptive reuse, and predevelopment work.[8]

Recipients utilizing multiple federal funding streams must comply with all related statutory and regulatory requirements and policies of each program used including the requirement that if a project is only partially funded with CSLFRF, the portion of the project funded must be an eligible use under the CSLFRF program. Grants may include specific federal cost share percentages or local match requirements – these vary by grant, federal awarding agency, and recipient. Refer to the Final Rule and other grant specific documents for requirements on cost-sharing and matching when blending and braiding funds for complementary purposes.[9]

Last Updated: March 20, 2023