Top Federal and State Grants for Affordable Housing in 2025

The affordable housing crisis remains one of the most pressing challenges in the U.S., with demand outpacing supply in communities nationwide. In response, federal and state grants for affordable housing in 2025 are more crucial than ever, providing key opportunities for developers, housing finance agencies (HFAs), and nonprofits to secure the necessary resources to address this growing need. By tapping into the right resources and navigating these opportunities strategically, stakeholders can secure the support needed to make a lasting impact.

In this blog, we’ll explore the top federal and state grants for affordable housing in 2025, their eligibility requirements, application processes, and expert tips to help you maximize your chances of success. From transformative new policies to innovative funding mechanisms, here’s everything you need to know about the latest developments driving affordable housing initiatives across the United States.

As of January 2025, several federal and state grants continue to support affordable housing initiatives across the United States. Below is an overview of key programs and recent developments:

Federal Grants and Programs:

1. Community Development Block Grant (CDBG) Program: Administered by the U.S. Department of Housing and Urban Development (HUD), the CDBG program provides communities with resources to address a wide range of unique community development needs, including affordable housing. Funds are allocated to states and local jurisdictions based on a formula considering factors like poverty levels and housing conditions.
   • Eligibility Requirements:
     • State and local governments are the primary recipients, but funding can be sub-granted to nonprofits and developers.
     • Projects must align with one of HUD’s national objectives: benefiting low- and moderate-income individuals, addressing slum or blight, or meeting urgent community needs.
   • Application Process:
     • Applications are submitted through local HUD field offices or state administering agencies.
     • Each state sets its deadlines and requirements, so early communication with your local agency is key.
   • Expert Tips:
     • Highlight how your project directly benefits low- and moderate-income residents.
     • Engage with your local government early to secure their support for your project.
     • Use HUD’s Consolidated Plan resources to align your application with broader community goals.
2. HOME Investment Partnerships Program: This HUD program offers grants to states and localities to create affordable housing for low-income households. Activities funded include building, buying, and rehabilitating affordable housing for rent or homeownership, as well as providing direct rental assistance to low-income individuals.
   • Eligibility Requirements:
     • State and local governments are eligible to receive funding, which can then be distributed to developers and nonprofits.
     • Projects must target low-income families, with specific income thresholds based on HUD guidelines.
   • Application Process:
     • Applications are coordinated through state and local government agencies.
     • Proposals must include detailed plans for project development, funding sources, and compliance with HOME program regulations.
   • Expert Tips:
     • Build partnerships with local housing authorities to strengthen your application.
     • Ensure your project includes long-term affordability provisions to align with HOME’s goals.
     • Attend HUD training sessions or webinars to stay informed about compliance requirements.
3. Green and Resilient Retrofit Program: Part of the Inflation Reduction Act, this program allocated $1 billion to modernize affordable housing with energy-efficient and climate-resilient upgrades. By November 2024, approximately 270 properties nationwide had benefited, encompassing over 30,000 rental units.
   • Eligibility Requirements:
     • Property owners of affordable multifamily housing, including public housing authorities, nonprofits, and private owners, are eligible.
     • Properties must meet HUD’s affordability criteria and demonstrate the need for energy-efficient or climate-resilient upgrades.
   • Application Process:
     • Submit an application through HUD’s Multifamily Assistance Program portal.
     • Applications require an energy audit or physical needs assessment to identify potential upgrades.
   • Expert Tips:
     • Leverage local energy efficiency programs for technical assistance and co-funding opportunities.
     • Highlight how your project aligns with climate resilience goals, such as reducing carbon emissions or preparing for extreme weather.
     • Demonstrate long-term cost savings and environmental benefits in your proposal.
4. National Housing Trust Fund: Established to provide grants to states to produce, preserve, and rehabilitate affordable housing for extremely low- and very low-income families. Funds are distributed annually based on a formula considering factors like the shortage of affordable rental units and the prevalence of low-income renter households.
   • Eligibility Requirements:
     • State governments are the primary recipients, but funding can be sub-awarded to developers, nonprofits, and housing authorities.
     • Projects must focus on creating housing for extremely low-income and very low-income households.
   • Application Process:
     • States must develop an allocation plan that aligns with HUD’s guidelines and submit it for approval.
     • Developers and nonprofits apply to their state housing agency for funding.
   • Expert Tips:
     • Focus on addressing the needs of extremely low-income households, as this aligns with the fund’s primary goal.
     • Use detailed demographic data to show how your project will meet a critical housing need in your community.
     • Ensure compliance with HUD’s affordability period requirements (20–30 years).

State and Local Initiatives:

States have developed various programs to address affordable housing needs, often supplementing federal efforts:

1. Accessory Dwelling Unit (ADU) Incentives: To combat housing shortages, several states offer financial incentives for homeowners to build ADUs. For instance, California provides grants up to $40,000 for pre-construction costs to eligible residents, though funding availability can vary. New York’s Plus One ADU Program offers up to $125,000 per grantee, with a total budget of $85 million allocated over five years. Vermont offers up to $50,000 to any homeowner through regional organizations, with a current $15 million budget. Colorado is rolling out a new program that includes down payment assistance and low-interest loans for ADUs, with $5 million allocated.
   • Eligibility Requirements:
     • Varies by state. Homeowners in participating states (e.g., California, New York, Vermont, Colorado) are eligible for financial assistance.
     • Homeowners must agree to use the ADU for affordable housing or specific community goals.
   • Application Process:
     • Applications are typically submitted to state housing finance agencies or regional nonprofit partners.
     • Requirements often include project plans, financial need assessments, and a commitment to maintain affordability.
   • Expert Tips:
     • Familiarize yourself with local zoning laws and permitting requirements for ADUs.
     • Collaborate with contractors experienced in ADU construction to streamline the process.
     • Emphasize how the ADU will address housing shortages in your area when applying for funding.
2. State Housing Trust Funds: Many states have established housing trust funds to support the development and preservation of affordable housing. These funds are typically financed through dedicated revenue sources and are used to provide grants or loans for housing projects that benefit low- and moderate-income residents.
   • Eligibility Requirements:
     • Eligibility criteria vary by state but generally include nonprofits, developers, and local governments.
     • Projects must serve low- and moderate-income residents.
   • Application Process:
     • Applications are submitted to the state housing agency managing the trust fund.
     • Proposals typically require project budgets, timelines, and evidence of community impact.
   • Expert Tips:
     • Engage with your state housing agency to understand funding priorities and tailor your application accordingly.
     • Highlight partnerships with local organizations to demonstrate community support.
     • Include a comprehensive plan for maintaining long-term affordability.

Recent Policy Developments:

1. Rent Control Measures: In July 2024, President Joe Biden proposed a plan to curb rent increases by penalizing landlords who raise rents by more than 5% annually. This proposal targets larger landlords with over 50 units and would apply to approximately 20 million units nationwide, pending congressional approval.
   • Eligibility Requirements:
     • Pending congressional approval, these measures may directly impact landlords with 50+ rental units.
     • Landlords must comply with proposed limits on rent increases to qualify for any related incentives.
   • Application Process:
     • Details will depend on the final legislation and state implementation plans.
   • Expert Tips:
     • Stay informed about legislative developments to ensure compliance with new regulations.
     • Consider proactive measures to improve tenant retention, such as offering fixed-term leases or maintenance incentives.
2. Affordable Housing Construction Initiatives: The federal government has partnered with states and territories to expedite the construction of new social homes. A $3 billion deal aims to build 5,000 social homes, in addition to the 13,700 homes from the first round of the Housing Australia Fund (HAFF). The goal is to construct 1.2 million homes by 2030.
   • Eligibility Requirements:
     • State and territory governments are the primary recipients of funding.
     • Nonprofits, developers, and community housing providers (CHPs) can access funds through partnerships with these governments.
     • Projects must target the development of affordable or social housing, adhering to income and affordability criteria defined by each jurisdiction.
   • Application Process:
     • State and territory governments outline their priorities for funding allocation and oversee the application process for CHPs, nonprofits, and developers.
     • Applicants must provide detailed proposals, including project timelines, budgets, and community impact assessments.
     • Applications are reviewed based on alignment with housing targets and affordability objectives.
   • Expert Tips:
     • Collaborate Early: Build strong partnerships with local government agencies and CHPs to align your project with their housing strategies.
     • Leverage Existing Infrastructure: If possible, integrate your project with existing developments to reduce costs and expedite timelines.
     • Emphasize Long-Term Impact: Highlight how your project will contribute to the overarching goal of constructing 1.2 million homes by 2030, including sustainability and affordability features.
     • Stay Informed: Monitor updates from your state or territory regarding funding rounds, application deadlines, and program criteria.

These programs and initiatives reflect ongoing efforts at both federal and state levels to address affordable housing challenges as of early 2025.

Conclusion

Top federal and state grants for affordable housing in 2025 includes programs like CDBG, HOME, and LIHTC. When combined with state-level funding opportunities, this can help HFAs and developers bridge financial gaps and bring critical housing projects to fruition. By understanding eligibility requirements, application processes, and tips for success, stakeholders can make meaningful strides in addressing housing affordability challenges. 

For more guidance and the latest funding opportunities, visit the HUD.gov or connect with your state housing finance agency.