Federal grants have become an important financial aid for real estate investing and development in 2023. With the real estate market cooling down after years of expansion, federal grants provide much-needed support for investors and developers to sustain projects and growth. Major grant programs like HOME Investment Partnerships Program and Community Development Block Grants inject billions into affordable housing, urban development, and community revitalization efforts. Understanding eligibility and application processes will enable investors to leverage federal grants. This article will summarize key information and conclusions on tapping federal grants for real estate investing this year.
HOME and CDBG are largest federal grant programs for real estate development
The two largest federal grant programs are HOME Investment Partnerships Program and Community Development Block Grants (CDBG), providing about $3.5 billion each year for housing and community development projects.
HOME grants help build and rehabilitate affordable rental housing, assist first-time homebuyers, and improve substandard housing through loans, equity investments etc. CDBG provides flexible funding for cities and states to develop viable communities through expanding affordable housing, anti-poverty programs, infrastructure etc.
Understanding these programs’ purposes, eligibility criteria, and application procedures will enable real estate investors to obtain grants fitting their projects.
New Markets Tax Credit also attracts private capital into real estate
The New Markets Tax Credit (NMTC) Program provides tax credit incentives for investors to make equity investments into specialized financial intermediaries called Community Development Entities (CDEs). CDEs then reinvest capital into commercial and mixed-use real estate projects in low-income communities.
Since inception, NMTC has catalyzed over $60 billion in capital investment through tax credit allocations. Real estate investors can apply for CDE certification and NMTC allocation to attract investor capital, or partner with CDEs to obtain financing.
Rural housing programs assist real estate development in small towns
For real estate investors focused on small towns and rural areas, federal grants like Rural Housing Repair & Rehabilitation Loans/Grants, Rural Housing Site Loans, Rural Community Development Initiative Grants etc. provide financing to develop affordable rental housing, build infrastructure, and improve housing conditions.
These programs are administered through the US Department of Agriculture (USDA) and aim to spur growth and improve quality of life. The USDA also offers loan guarantees to reduce risks for private lenders financing rural rental housing projects.
State and local grants also available for real estate investing
Besides federal grants, real estate investors should also look into state and local grant programs that support community development and affordable housing. These include state housing trust funds, tax increment financing from local redevelopment agencies, municipal development funds etc.
Networking with state and local agencies to learn about available grants, cooperating with them on joint applications, and aligning projects with their development goals can help investors secure additional financing.
Federal grants through major programs like HOME and CDBG provide important capital for real estate development and investing, especially in affordable housing and community revitalization efforts. Investors should understand eligibility and tap into suitable grant sources to strengthen project financials.