Affordable Housing Finance 101

The financial intricacies involved in building affordable housing can be difficult to understand. This explainer breaks down the foundational concepts.

1 minute read

June 9, 2025, 5:00 AM PDT

By Shelterforce


View of a housing permit document with a home blueprint, stamped "approved."

Francesco Scatena / Adobe Stock

Affordable housing is hard to build not because of lack of need, but because of how it's financed. This guide explains the basics, including:

  • Capital Stack: Projects are funded through a mix of debt and equity, used to cover land, construction, and soft costs.
  • The Funding Gap: Affordable rents generate less income, meaning smaller loans—creating a gap that must be filled to make a project viable.
  • Closing the Gap: Developers use a mix of:
    • Subsidies (grants, tax credits, vouchers)
    • Cost-saving strategies (donated land, fee waivers)
    • Lower-cost capital (below-market loans and equity)
  • Why It Matters: Understanding these tools helps advocates, policymakers, and funders support more sustainable, equitable housing development.

Wednesday, May 28, 2025 in Shelterforce Magazine

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I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

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