How Nonprofit Housing Developers Fund Housing: Grants, Government Support, and Project Viability

There is a shortage of affordable and attainable housing. Nonprofit housing developers face challenges from rising labor and construction costs, but unlike for-profit developers, nonprofit housing organizations focus on long-term affordability, community stability, and equitable access to housing rather than maximizing profit.

Because affordable housing generates lower financial returns than market-rate housing, nonprofit developers rely on government grants, public funding, and philanthropic support to make projects financially feasible. Understanding how nonprofit housing funding works, particularly government and organizational grants, underscores how attainable housing gets built.

Housing Requiring Specialized Funding

Affordable housing developments operate under a different financial model than traditional real estate development. In market-rate development, rents or sales prices are set based on demand, and developers recover costs and generate profit. In affordable housing, rents and sale prices are restricted to ensure accessibility for low- and moderate-income households. This creates a funding gap between the actual cost to develop housing and, the reduced revenue affordable housing generates. Grants and public funding help close this gap. Without these funding sources, many affordable housing developments would not be financially possible.

The Major Funding Sources for Nonprofit Housing Developers

Funding for nonprofit housing developers may be assembled from multiple sources. Grants are an important funding source for affordable and attainable housing. Federal, state, and local governments provide grants to support housing development.  Grants may be structured to help with land acquisition, pre-development costs (site studies, architecture, engineering), construction costs, infrastructure improvements, and long-term affordability protections.

Government funding may be available through the following programs HOME Investment Partnerships Program, Community Development Block Grants (CDBG), local housing trust funds, and state and municipal affordable housing programs. These funds are awarded to nonprofits aligned with public housing priorities.

Organizational and Foundation Grants

Private foundations, corporate philanthropy, and mission-driven organizations also provide grants to nonprofit housing developers. These grants often support early-stage project planning, innovative housing models, community engagement, supportive housing services, and capacity building and staffing. Support for the Connected Communities Initiative has come from these types of grants and they have helped complete homes in Queen City and rebuild the community center at Hillburn Hills.  Foundation grants are particularly important in the early stages of development, when projects may not yet qualify for large government funding.

Tax Credit and Public Financing Programs

While technically not grants, programs like the Low-Income Housing Tax Credit (LIHTC) work alongside grants to finance affordable housing. Tax credits incentivize private investors, while grants reduce the amount of debt required, making projects financially sustainable.

How Nonprofit Housing Developers Apply for Government Grants

Government housing grants are awarded through a formal application process designed to ensure transparency and public accountability. The burden of these applications, timeline management, and acquiring the talent to apply for and obtain grants is on a non-profit.  An outline of the process includes: Government agencies publish funding opportunities through Notices of Funding Availability (NOFAs) or Requests for Proposals (RFPs). These announcements outline funding amounts, eligibility, target populations, affordability requirements, and application deadlines. Followed by the application for grants.

Written grant applications require nonprofit housing developers to demonstrate community need and organizational capability. Applications include: details about the housing development, data demonstrating local housing shortages, rent burdens, or displacement risks; construction schedules, permitting status, and readiness to proceed; development budget; evidence of the nonprofit’s experience managing housing development; and the expected outcomes. The process ensures public funds are awarded to projects spearheaded by reliable, trusted developers and that these projects will have lasting community impacts.

How Housing Grants Are Evaluated and Awarded

Housing grant applications undergo a review process in which they are evaluated on project feasibility, financial stability, alignment with housing policy goals, organizational reputation, and potential community impact. Projects that best meet these criteria receive funding awards, and once awarded, nonprofits must comply with strict reporting, affordability requirements, and long-term monitoring.

Nonprofit housing organizations cannot rely on profit margins to fund new projects; grants are essential. Developers face a number of hurdles in obtaining grants, from the competitive application process and compliance requirements to detailed financial reporting, uncertain approval timelines, and potential cash flow delays due to reimbursement structures. Managing these elements requires organizational capacity, financial management, and exceptional planning.

DCH relies on grants to fund its development and community initiatives. We have been awarded numerous grants thanks to our lean, talented team of leaders. If you would like to learn more about supporting DCH in Dallas and contribute to our commitment to improving equity and access to safe and attainable housing, contact us here.