Equitable Adaptation Legal & Policy Toolkit

Funding Tools for Housing

Funding resilience features in affordable housing can not only enhance the climate resilience of homes, but could also provide long-term investment benefits for residents, building owners, communities, and other stakeholders. Studies by the Energy Efficiency for All Initiative and other researchers have demonstrated that many resilience measures can yield dividends that property owners could use in calculating return on investment and in other financial analyses.See footnote 1 For example, building envelope efficiency, installing window shading, and incorporating other resilience measures can lead to lowered costs in utility bills, operation and maintenance costs, and insurance premiums.

Funding tools can be deployed to build new as well as retrofit or preserve existing affordable housing. However, multiple factors present challenges for funding resilience investments in affordable housing. Foremost, the availability of government funding to support affordable housing needs is already low, with even fewer resources dedicated to retrofits or resilience upgrades that prepare existing and new housing for climate change impacts. Meanwhile, the few disaggregated funding programs available to retrofit existing housing often focus primarily on bringing buildings to code, and they lack the flexibility to address the range of needs that will increase resilience and reduce total housing costs of residents. Despite these challenges, cities could raise revenue for housing trust funds, which could be leveraged to either support the development of new, affordable resilient housing or provide grants and loans to retrofit existing housing stock.

Local Housing Trust Funds

State and local housing trust funds direct dedicated streams of public revenue to support local affordable housing needs. Currently, there are approximately 800 housing trusts in cities, counties, and states, which generated $1.5 billion for affordable housing projects in 2018. Forty -seven states and the District of Columbia have at least one designated state housing trust fund, and states have increasingly enabled cities and counties to create local housing trust funds through legislation and providing matching funds. Funding may be dedicated to the creation, rehabilitation, or preservation of affordable housing.

Federal Programs

The longest-running and one of the largest sources of affordable housing funding is the Low-Income Housing Tax Credit (LIHTC) program, which is administered by the Internal Revenue Service and provides tax incentives to developers to encourage the creation of affordable housing. Under the program, a state housing finance agency receives tax credits from the federal government, which the agency then awards to qualifying developers through a competitive process. Since the creation of the program in 1986, LIHTC has produced or preserved roughly 2.3 million units of affordable housing, and, despite decreased funding in recent years, the program continues to serve as the primary source of funding for preserving or creating affordable rental housing in the country.See footnote 2 

Additionally, several sources of federal funding help capitalize state and local housing trust funds. These programs can be used to provide additional sources of funding to develop new affordable housing or preserve existing housing stock. One of the most highly-funded federal programs, the HOME Investment Partnerships Program, is a block grant administered by HUD to fund affordable housing.See footnote 3 Funding is allocated by formula to participating jurisdictions (states and other localities) and must be used for one of four purposes: rehabilitation of owner-occupied housing; homebuyer assistance; rental housing construction and rehabilitation; or tenant-based rental assistance.See footnote 4 At least 15% of HOME funds must be dedicated to community housing development organizations (CHDOs), which can set aside funds for technical assistance (e.g., feasibility studies) and pre-construction costs (e.g., architectural plans, zoning approval). In 2019, the program received $1.25 billion in appropriations.

Created in 2008, the National Housing Trust Fund (NHTF) is one of the newest federal programs that provide a dedicated source of revenue for the development and preservation of rental housing for low-income households.See footnote 5 Funds are distributed to states through a formula block grant; states are required to designate entities (e.g., a housing finance agency or community development organization) to receive and administer NHTF funds, which has increased nationally from $174 million in its first year in 2016 to $245 million in 2019.See footnote 6 Additionally, states are required to submit an Allocation Plan each year that proposes distribution of NHTF funds consistent with housing priorities identified in its Consolidated Plan.See footnote 7 States may then pass on funding to cities as subgrantees.See footnote 8 While similar to the HOME program, NHTF is more targeted for rental housing for households at lower income levels.See footnote 9

In addition to HOME and NHTF, HUD also administers the Section Capacity Building for Community Development and Affordable Housing Program (Section 4). Under the Section 4 program, HUD funds Community Development Corporations (CDCs) and Community Housing Development Organizations (CHDOs) to create investments in affordable housing and other community development areas.See footnote 10 Funding is administered through one of three national intermediaries: Enterprise Community Partners, Inc., the Local Initiatives Support Corporation (LISC), and Habitat for Humanity International.See footnote 11 Eligible activities for funding include technical and administrative support (e.g., participation in fair housing planning, community consultations); development assistance to increase affordable housing and economic development for low- and moderate-income households; and the implementation of other HUD programs, including the HOME program.

Considerations of Funding Tools for Resilient Affordable Housing


  • Housing trust funds contribute to job creation, spur local economic development, and keep open local businesses.


  • Housing trust funds used to implement projects that enhance the resilience and sustainability of affordable housing (e.g., through green infrastructure or solar installations) could also help cities enhance their environmental goals.


  • Local housing trust funds could be tailored to specific housing needs of the local community.
  • Programs designed to support home improvements are often provided through rebates and tax credits and available only to owners of single-family homes, which limit the availability of these programs to provide assistance to lower-income residents who lack the financial resources to pay the cost of improvements upfront, as well as renters living in multi-family housing.


  • With decreased investments in LIHTC, relatively flexible federal housing programs like HOME can be used to address gaps in project financing.
  • Housing trust funds are a relatively flexible source of funding for local governments to support affordable housing.
  • Local housing trust funds may not be sufficient on their own to implement affordable housing programs and may require consolidation with other funds.
  • Some local housing trust fund programs may not have the flexibility to allow for resilience and other sustainability improvements but are focused instead on funding to redress code violations.


  • While rare, state housing trust funds could be diverted to other purposes. Therefore, state legislation should explicitly require funding to be strictly designated for affordable housing purposes.

Lessons Learned

  • Traditional affordable housing programs do not typically provide funding for resilience and sustainability improvements — features that protect residents from climate disruptions — while also reducing the total cost of housing. Therefore, cities may need to align and combine different funding sources to enable holistic retrofits for housing. For example, project-based grants that fund retrofits or other resilience improvements on housing could be paired with programs that offer vulnerability studies and risk assessments in order to maximize funding and target the most climate-vulnerable structures within the community.
  • When developing the state Allocation Plan for receiving NHTF funding, low-income residents should be made aware of the process for developing the plan in order to increase opportunities for participation and comments before the plan is finalized.
  • Programs that fund resilience and sustainability improvements to housing should provide up-front funding to the residents who are most in need. Similar funding should be provided to landlords of multi-family housing, so long as they agree to avoid displacing renters by passing on the cost of improvements to existing tenants. 



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