Over the past year, a growing number of state governments have capitalized revolving loan funds (RLFs), empowering their housing finance agencies to finance mixed-income housing outside of the typical LIHTC pipeline. In a blog post last September and a report published in December, we covered the initial round of investments in Massachusetts, Michigan, New York, Utah, and Oregon. Since then, Virginia, Arizona, and Wyoming have proposed or created their own versions, while New York and Oregon have both created a secondary RLF program.
What is driving the creation of these types of funds? State HFAs are routinely oversubscribed in their requests for LIHTC awards, and while the One Big Beautiful Bill is projected to add 1.22 million units over the next decade through expanded 9% credits and a revised bond test for 4% credits, millions additional units are still needed to meet current demand. Meanwhile, the supply shortage has pushed cost burdens up the income spectrum. Low-income renters remain the most severely affected, but the fastest growth in cost burden has been among middle-income renters (households earning 60-120% AMI) where the share paying more than 30% of income on housing rose 9.1% between 2019 and 2024, a population that existing federal programs largely don’t reach. The combination of these trends is pushing HFAs to innovate and explore ways to increase mixed-income production in the face of static federal funding for affordable housing.
This is not the first time states have stepped up in response to federal retrenchment. Following the Reagan administration’s sharp cuts to HUD funding in the early 1980s, states began building their own affordable housing financing programs. States stood up their own LIHTC programs to layer on top of the new federal credit. Today, there are 33 such programs in the country. A smaller number of states (MA, CT, NJ, IL, and HI) created state-level housing vouchers, modeled after the federally funded Section 8 program. The current wave of RLFs is a continuation of this pattern, with one important difference: unlike those earlier programs, which adapted federal subsidies, the RLF model was first pioneered at the local level.
In 2021, the Montgomery County Housing Opportunities Commission (a joint PHA and HFA) created its Housing Production Fund, providing subordinate construction financing to replace high-cost private equity. Notably, the HPF was able to finance development with 10% of units at 65% AMI and 20% of units at 50% AMI without the use of LIHTC, PABs, or other federal subsidies. Local agencies in Atlanta, Chattanooga, and Chicago have created and seeded similar housing production funds, with dozens of more municipalities considering doing the same (Note: CPE worked with both Chattanooga and Chicago to help establish their programs).
Most state RLF programs follow the same basic logic: provide subordinate construction financing to unlock mixed-income deals that are fully permitted and entitled but can’t close their financing gap. But a variety of approaches are starting to emerge. The Michigan State Housing Development Authority aims to convert the backlog of their LIHTC pipeline to RLF deals. MassHousing’s Momentum Fund takes a different financing approach altogether, entering deals at permanent conversion rather than construction, providing preferred equity alongside subordinate permanent debt in a first-loss position next to a Freddie Mac product. Many other programs have yet to finalize their term sheets, and new structures will likely continue to emerge.
New Programs
In Oregon, the state House and Senate have both passed legislation to establish a $20 million Mixed-Income Development Loan Fund through SB 1567. The bill directs Oregon Housing and Community Services (OHCS) to provide below-market, short-term subordinate loans for mixed-income projects that include a dedicated number of affordable units. The bill passed the Senate 22-3 and the House 48-3 and is currently awaiting signature from Governor Tina Kotek (Note: CPE has previously provided testimony to the Oregon Senate on RLFs).
SB 1567 is distinct from Oregon’s existing Moderate-Income Revolving Loan program, which we covered in our initial blog post last September. Created in 2024 with $75 million in General Fund resources, this program has OCHS lending to cities and counties, who then award funds as grants to developers, with repayment flowing back through a fee in lieu of property taxes.
In Virginia, House Bill 820 and Senate Bill 490 would authorize the Department of Housing and Community Development (DHCD) to allocate up to 15% of the Virginia Housing Trust, which exceeded $80 million last year, to a new revolving loan fund specifically for mixed-income developments. This piece of legislation is part of Governor Abigail Spanberger’s broader “Affordable Virginia Agenda,” which aims to bring down housing, energy, and healthcare costs. On March 14th, the House of Delegates agreed to changes made by the Senate’s Finance and Appropriations Substitute, which changed the revolving loan fund from a permanent authorization to a two-year pilot program. This version is now sent to the Governor for approval.
The initial bill text required projects to reserve 20% of units for households at 50% AMI or 40% of units for those at 60% of AMI, if paired with their state LIHTC program, and capped loans at $60,000 per unit. In the version heading to the Governor’s desk, DHCD is directed to develop guidelines and may consider setting loan cap amounts and income limitations. While DHCD manages the policy and fund allocation, the state’s housing finance agency, Virginia Housing, is tasked with the origination and servicing of the loans. DHCD will prioritize projects that have already received local entitlements and can demonstrate a financing gap.
In Wyoming, Senate File 64 (2026) proposed establishing the Wyoming Housing Revolving Loan Account, a $30 million fund administered by the Wyoming Community Development Authority (WCDA), the state’s housing finance agency. The bipartisan legislation was introduced in early February, 2026 but failed at introduction in the Senate. The capitalization of the fund was planned to come from the state’s Strategic Investments and Projects Account (SIPA), which is primarily funded by the state’s investments in minerals.
The legislation would have provided low-interest loans to local governments, housing authorities, and nonprofit entities for the construction, rehabilitation, and land acquisition of workforce and affordable housing. There are no specific requirements for reserving a certain amount of units at a specific AMI level. Additionally, as written, the legislation would not have allowed for-profit developers to access the fund. Up to 80% of the fund was to be allocated for construction loans with interest rates capped at the federal funds rate, while the remaining 20% was to be dedicated to zero-interest loans for planning and predevelopment expenses.
In Arizona, Governor Katie Hobbs announced the creation of the Arizona Housing Acceleration Fund during her January 2026 State of the State address. The fund is designed as a pooled bond fund managed by the Arizona Finance Authority (AFA). The Governor’s FY 2027 Executive Budget proposal allocates $5 million to the initiative, consisting of $2.5 million from one-time General Fund dollars and $2.5 million from American Rescue Plan Act (ARPA) funds.
In New York, Empire State Development, the state’s umbrella organization for economic development, and CenterState CEO, a regional economic development organization, announced the creation of the $150 million Housing Central New York Fund in February, 2026. This fund operates independently of the state HFA-led Housing Accelerator Fund. The public-private partnership is designed to address the anticipated demand for workforce housing following Micron’s $100 billion semiconductor investment in the Syracuse region. The fund is capitalized by $30 million in state seed funding from Empire State Development, which is leveraged with $120 million from private partners, including Micron and regional financial institutions. Administered by the Community Preservation Corporation, the fund aims to facilitate the construction of at least 2,500 units over its initial seven-year term across Cayuga, Cortland, Madison, Oneida, Onondaga, and Oswego counties.
Financing is available for both rental and for-sale mixed-income developments, provided they are located within “Pro-Housing” certified communities. Projects must include a minimum density of 10 units per acre and a minimum project size of 10 units. For rental developments, the fund requires that at least 10% of units be reserved for households below 80% AMI, while for-sale projects must set aside 10% for households below 110% AMI.