Affordable Housing Programs Offered by Federal Home Loan Banks May Fit Community Buyers’ Capital Needs

(February 2019) While most of us in the housing community tend to pay close attention to community investment efforts by Fannie Mae and Freddie Mac, there are other Government-Sponsored Enterprises that also make a sizable contribution to neighborhood stabilization: the Federal Home Loan Banks (Banks). The beginning of each year is a particularly good time to focus some attention on the Banks’ Affordable Housing Programs (AHPs), which fund many types of projects, including single family rehab. The Banks typically release implementation plans in the first quarter spelling out their priorities, and these funding windows can be great opportunities for our Community Buyers to strengthen relationships with partner financial institutions and secure additional capital for acquisition and rehab.

The Federal Home Loan Bank System is made up of 11 Banks each covering a geographic district. The Banks are chartered by the government but are owned by the more than 7,300 financial institution members that purchase Bank stock. While the Banks were designed with a public purpose in mind overall, AHP was specifically created to advance community development and address local housing needs. Each Bank is required by the Federal Home Loan Bank Act to allocate 10 percent of its net income from the previous year toward AHP.

The Federal Housing Finance Agency (FHFA) issued a final rule in December 2018 to amend the AHP regulation to, among other things, better meet affordable housing needs. The changes include authorizing the Banks to create separate competitive funds targeting more specific affordable housing projects and allowing them greater flexibility in creating their project scoring systems with their district’s affordable housing needs in mind. Banks have until 2021 to implement all changes in the rule, so they may not be reflected in the 2019 AHP competitive applications, but rather are more likely to be taken into account in the 2020 funding round.

There are two AHP sub-programs: the Homeowner Set-Aside Program, which provides subsidies for homeowners, and the Competitive Funding Program, which allows member banks to submit project funding applications in partnership with developers, community organizations, and CDFIs. The latter program is likely the best fit for our Community Buyers, as funds can be used for the acquisition, construction, or rehabilitation of affordable rentals or homeownership units.

Here are a few key things to consider when applying:

  • Potential applicants (sponsors) must find a partner that is a member of a Bank and submit a joint application
  • Sponsors do not need to be located in a Bank’s district to apply for Competitive Program funding but do need to partner with a member institution located in that district in their application
  • Each Bank has its own point-based scoring system, which can be found in its implementation plan – applicants can also find information in the implementation plan that will help them score their own projects to gauge competitiveness based on the scores of previously funded projects
  • Projects have to pass a feasibility review
  • Maximum award amount varies depending on the Bank
  • Funding awards are made based on project score, starting with the highest scoring application, until all funds are exhausted
  • Applications can take as long as several months to prepare for first-time applicants, especially if they do not have an established relationship with a member financial institution

A number of current NCST Community Buyers have previously received AHP competitive funding. Here are some of their tips and takeaways:

What advice would you give to other NCST community buyers about applying for 2019 AHP funds, especially in regard to what worked well/what did not work well in your application process?

  • Lisa McGovern, CHN Housing Partners, Ohio: We sit down as a group and say, ‘these are the kind of projects we have where there’s a need for AHP,’ and think of the Banks where our applications would be the most competitive. We also look at their scoring and underwriting processes, which vary depending on the Bank. I would recommend that you start with your natural relationships; if you already work with Chase, figure out which Banks they are members of. A good relationship manager and bank staff will be able to tell you if a deal is competitive or not. Early on, try to score your deal because there are structural things you can do to help it score better.
  • Adam Blake, County Corp Affordable Housing, Ohio: Attend FHLB trainings and partner with a lending institution that has a lot of experience with the AHP program.  You also must have the capacity in your organization to follow AHP guidelines to the letter and fulfill the reporting requirements. 
  • Robyn Sandys, North West Housing Partnership, Illinois: Really understand the audience you are trying to reach and make sure you are offering a product they would want.

If you were awarded funding, how was it used? What impact did the funding have on your organization and the people you serve?

  • Adam Blake, County Corp Affordable Housing, Ohio: Gap filler for equity into LIHTC projects and match for home repair grant programs we manage. Emergency Home Repairs are one of the greatest needs for senior households in Dayton and Montgomery County. Having this resource to leverage with local and state funding is key to addressing this need. FHLB partnerships effectively double the number of senior households we can assist each year which enables seniors to safely age in place in their homes. Without this, they could end up in nursing homes or less desirable and less healthy situations.

 Links to Bank’s AHP websites:


Theo Chang serves as a Senior Policy Associate for NCST.