Powering Affordable Housing in 2026: Key Government Programs Every Owner, Developer, and Investor Should Know

Federal housing programs offer a lifeline for the millions of Americans struggling to find a place they can afford to call home.  For builders and investors, they offer something just as important: the chance to create a lasting impact in their communities. At a time when affordable housing supply for extremely low-income households is short by an estimated 7.1 million units, federal government programs help developers and owners meet the needs of lower-income families, seniors, and workers underserved in the housing market.

From tax incentives and grants to public-to-private partnerships, a range of tools can unlock new affordable housing streams while still supplying strong, sustainable returns.

Low-Income Housing Tax Credit (LIHTC)

The Low-Income Housing Tax Credit (LIHTC) is a federal program aiming to encourage private investment in affordable housing for low-income individuals and families. Developers receive tax credit allocations that they can sell to investors, raising equity and making it more financially viable to build or renovate affordable units.

By leveraging private equity, LIHTC helps close financing gaps that can prevent projects from moving forward. This allows communities to add much-needed affordable housing while using limited public resources more strategically.

LIHTC properties have restrictions on rent increases during their initial 15-year compliance period, and many, for an extended period of 30 years or more. The maximum rent that can be charged is determined as a percentage of the area’s median income, which helps to keep the properties affordable for tenants. These rents are typically 60% or less of the area’s median income depending on the project’s elected set-asides for each income bracket. Once this period ends, landlords gain more flexibility in raising rents or transitioning units based on evolving market and community needs.

Building on its longstanding impact, the LIHTC program has recently been expanded through the 2025 One Big Beautiful Bill Act (OBBBA), introducing changes that added additional credits to the market for investors, a move which is expected to increase affordable housing production in the years ahead.

Section 8 Housing

Also called the Housing Choice Voucher Program, Section 8 housing provides rental assistance to low-income families. Residents typically contribute about 30% of their adjusted income to rent, with the balance paid through federal funds administered by a local Public Housing Authority (PHA).

This program offers attractive benefits to owners by providing a stable demand and a reliable source of income. Housing assistance payments are made by the PHA on behalf of the resident, if program requirements are met.

Beyond financial considerations, many owners and developers see participation as a way to deliver essential housing in communities where affordability gaps are widening. This positive influence can create long-term relationships with residents, municipalities, and local partners.

Developers interested in building Section 8 housing can connect with their local PHA to review the requirements.

Section 202 and 811 Supportive Housing

Section 202 provides interest-free capital advances for the development, acquisition, or renovation of housing for low-income elderly households, as well as Project Rental Assistance Contracts (PRACs) to help subsidize rental costs for tenants. The capital advance does not need to be repaid as long as the property remains available for low-income elderly housing -- typically at least 40 years.

Section 811 provides capital and rental assistance for housing serving very low-income individuals with disabilities, as well as access to supportive community services, allowing residents to maintain their independence. Like Section 202, the capital advance does not need to be paid back if the property continues to serve very low-income residents over the regulatory period.

HOME Investment Partnerships Program

HOME represents a powerful public-to-private partnership program to fund affordable housing projects. It’s the largest federal block grant program, providing funds by formula directly to state and local organizations for low and very low-income housing. HOME funds may be used for new construction and rehabilitation, as well as direct homeownership assistance (e.g., down payment assistance), and time-limited tenant-based rental assistance.

These funds are generally awarded to participating jurisdictions who contribute 25 cents of non-federal funds for each HOME dollar to a project.

Community Development Block Grant (CDBG) Program

Community development block grants fund a wide range of community-based projects, including acquiring and rehabilitating housing, infrastructure such as streets and sewer lines, as well as public facilities and services. These grants seek to address high priority economic development goals, with housing being a top priority. Municipalities smaller than 50,000 people must apply for State CDBG grants.

These grants are issued on a formula basis directly to municipalities to develop urban communities. Developers can work with cities and communities that have qualified for these grants to collaborate on eligible activities.

Public Housing Program

HUD’s public housing program supports eligible low-income, elderly, or disabled individuals. Housing can take the form of high-rises, garden-style apartments, and single-family units, depending on the community.

To qualify as part of HUD’s program, owners and developers will need to work with the local PHA to construct units in accordance with the program.

While traditional new public housing construction is less common today, developers can partner with local PHAs to participate in redevelopment or mixed-finance initiatives. Many have repositioned properties through programs such as the Rental Assistance Demonstration (RAD), converting public housing subsidies to long-term Section 8 contracts to enable private investment, recapitalization, and public-private redevelopment. Developers typically engage through RAD, Section 18 disposition, or other preservation and redevelopment initiatives rather than building traditional new public housing from the ground up.

Rural Housing Service (RHS) Program

The Rural Housing Service Program, provides federal financing to expand affordable housing and strengthen essential community infrastructure in rural areas. Developers can access loans and loan guarantees through programs such as Section 515 (multifamily rental housing) and Section 538 (loan guarantees) to create single- and multifamily housing that serves low- and very-low-income households.

RHS also supports the development or renovation of community facilities—including schools, healthcare centers, daycare facilities, and fire or police stations—typically through partnerships with nonprofits, local governments, and public agencies. By collaborating with these organizations, developers can leverage RHS funding to deliver both housing and community amenities, addressing critical rural needs while maintaining sustainable project economics.

Federal Home Loan (FHLB) Affordable Housing Program

Under federal law, each Federal Home Loan Bank must set aside at least 10 percent of its annual net earnings for its Affordable Housing Program (AHP), which supports affordable housing initiatives in its district. These funds may be used to finance the purchase, construction, or rehabilitation of owner-occupied housing for low- and moderate-income households, as well as rental housing where a portion of units are affordable and occupied by very low-income households.

AHP funds are made available through a competitive application process in which a financial institution member of an FHLB applies on behalf of a sponsor (such as a nonprofit or for-profit developer). Projects are scored against other applications using the bank’s scoring criteria, awarding grants to members whose applications rank highest.

Affordable Housing with Walker and Dunlop

Federal housing programs are essential to addressing today’s affordability crisis. When owners, developers, and investors strategically leverage these incentives, they not only enhance portfolio performance but also deliver meaningful, long-term impact in their communities.

Walker & Dunlop moves affordable housing from concept to reality—guiding clients through their options, uncovering viable opportunities, and securing the capital needed to execute with confidence.

If you’re ready to put these programs to work on your next project, connect with us to access opportunity and create lasting community value.