Lenders anticipate elevated affordable housing activity for the rest of 2026, supported by recent expansions to the low-income housing tax credit (LIHTC), including the 25% bond test and the increase in 9% allocations.
“We expect these changes to lead to increased deal volume for both investment and lending,” says Lisa Gutierrez, senior vice president and director of business development, affordable housing, at U.S. Bank. “As a lender that has supported affordable housing through multiple market cycles for more than 35 years, we plan to remain an active, disciplined provider of capital as the market adjusts to these expanded resources.”
According to Maria Barry, national executive of Community Development Banking at Bank of America, stabilizing rate conditions and increased capital availability also support strengthening lending activity.
“The policy environment in 2026 creates meaningful opportunities to expand options. Recent federal changes, including expanded 12% LIHTC allocations and the reduction of the private-activity bond test from 50% to 25%, significantly widened eligibility for 4% LIHTC allocations and unlocked bond capacity for more developments,” Barry notes.
Lenders also expect strong appetites from Fannie Mae, Freddie Mac, and the Federal Housing Administration. Agency volume caps for Fannie Mae and Freddie Mac set at $88 billion each, a 20% increase over 2025, provides substantial capacity for affordable housing financing.
“Since mid-2024, the lending environment has shown significant improvement. Debt funds are experiencing high liquidity with spreads decreasing by over 100 basis points,” says C.W. Early, senior managing director at JLL Capital Markets. “All lender types—including agencies, banks, life companies, and debt funds—continue to maintain active participation.”
Robert Likes, president of KeyBank Community Development Lending & Investment, says the bank anticipates being active through the remainder of the year and is targeting production levels exceeding 2025.
“Demand for both preservation and new affordable housing remains strong, and we see continued opportunity to deploy capital where it can have long-term impact,” Likes adds.
In 2025, Affordable Housing Finance’s top 25 affordable housing lenders provided $72.2 billion in permanent and construction loans to developments that serve households up to 80% of the area median income. That’s an increase from the $60.1 billion in loans provided by the top lender list for 2024.
Citi Community Capital retained the top spot on the list, providing $7.7 billion to affordable housing properties last year, up from $7 billion in 2024.
“While the persistent elevated soft and hard costs continued to challenge the economic viability of affordable housing development budgets, Citi Community Capital leaned fully into its balance sheet capital, deep market expertise, and longstanding affordable housing client relationships to help those clients bring their projects to fruition,” says Jeremy Johnson, head of Citi Community Capital.
KeyBank Real Estate Capital, Berkadia, J.P. Morgan, and Bank of America rounded out the top five lenders.
Top 25 Lenders of 2025
Source: AHF Lenders Survey, March 2026. Totals include permanent and construction loans for properties at incomes up to 80% of the area median income.
Note: The Top 25 rankings reflect only those companies that provided Affordable Housing Finance with figures. If you’d like to be considered for next year’s rankings, please contact Christine Serlin at cserlin@questex.com.
Challenges Persist
While lenders predict increased activity this year, threats and uncertainty still exist in the market.
“The biggest challenges facing the affordable housing lending market continue to be rising costs and increasing complexity,” says Gutierrez. “Higher construction and operating costs, interest rate volatility, and layered financing requirements can strain both development and long-term operations.”
Andrew Warren, senior vice president at TD Bank, agrees, saying the top threats are volatility and unpredictability.
“Construction costs, interest rates, operating expenses, delayed timelines, and uncertainty of previously thought to be rock-solid subsidy commitments can all move against a project at once, especially as lenders need to evaluate factors outside of any developer or municipality’s control, including labor shortages, tariffs and supply chain constraints, rising insurance premiums, and even strife in the Middle East,” he says. “In addition, the continually evolving regulatory landscape and extended timelines for our planning, entitlements, and financing approvals make capital planning challenging as our closing horizons get extended. Both inject significant uncertainty for the feasibility of any affordable housing development.”
According to Kamara Green, executive vice president and national director of affordable production at BWE, current geopolitical events are impacting costs in all areas of real estate.
“The anticipated rate cuts will not be realized in the near future,” she warns. “The cost of materials and labor will increase as inflation begins to creep back up.”
Both Likes and Jeff Englund, executive vice president of affordable housing at Greystone Servicing Co., note the most significant risk remains the constrained tax credit equity market.
“A limited pool of equity investors and tight pricing continue to affect deal feasibility,” Likes shares. “Without sufficient LIHTC equity, projects struggle to move forward, which directly impacts lending activity across the sector.”
Englund adds that the newly lowered 25% bond test has created a surplus of 4% LIHTC transactions in the market.
“In response, there will need to be legislative changes that will encourage new investors to enter the LIHTC equity market, enabling more 4% deals to move forward,” he says.
Karen Purcell, head of community development banking for J.P. Morgan, also notes collaboration is needed to address the finance gap many deals are seeing.
“The gap between development costs and available financing sources is a challenge. Construction costs, labor shortages, and regulatory hurdles are putting pressure on deal economics,” she says. “Addressing these challenges will require collaboration across the industry—from lenders and developers to policymakers—to streamline processes, dedicate subsidy gap filler dollars, and reduce barriers to delivering the affordable housing communities need.”
2026 Lending Trends
Preservation will be one of the most active segments of the affordable housing market, according to several lenders.
“Preservation and recapitalization strategies will remain a major focus as the industry works to protect the existing affordable housing stock,” notes Purcell.
Likes points to the approximately 1 million LIHTC units expected to exit their compliance periods over the next decade as well as the reduction of the 50% test to 25% significantly increasing tax-exempt bond capacity that removes a constraint that previously limited preservation activity in many states.
“That combination creates a meaningful opportunity to preserve existing affordable housing stock,” he says. “We expect to lean in by providing acquisition and bridge financing that allows sponsors to move quickly, assemble capital, and preserve affordability at properties that otherwise transition out of their original compliance periods.”
Early says, in addition to preservation financing, portfolio-level transactions are shaping the landscape in 2026. He adds new federal and local subsidies are incentivizing preservation over market-rate conversion, prompting borrowers to capitalize on these programs.
“Entity-level transactions, specifically general partner interest sales and portfolio recapitalizations, have experienced a remarkable 62% year-over-year increase in transaction volume, significantly outpacing single-asset activity,” Early says. “This trend is primarily driven by succession planning among foundation-generation affordable developers and the need for growth capital. Our recent transactions encompass GP interest recapitalizations with newly formed fund vehicles and portfolio acquisitions, signaling a trend toward sector consolidation.”
He also notes that borrowers are increasingly utilizing recapitalization and refinancing as alternatives to outright sales. “With $324 billion in dry powder and transaction volumes still in recovery, equity recapitalizations offer a means of accessing liquidity without full disposition—a strategy particularly appealing given the current pricing dynamics,” he says.
Bank of America’s Barry says she expects additional growth to come from middle-income and workforce housing opportunities this year.
“As we respond to our clients’ needs, we are seeing increased interest in funding affordable housing through more conventional structures that do not rely on LIHTCs,” shares Gutierrez. “In parallel, we are exploring opportunities to lend to workforce housing developments in markets experiencing population growth, with strong long-term fundamentals and meaningful gaps between market-rate and affordable rents.”
According to Purcell, adaptive reuse also could gain traction as communities look for ways to unlock new housing supply that can be delivered to the market quickly.
For Warren, three trends stand out: sharpened pencils, more creative gap filling, and a bigger premium on execution certainty over pricing.
“If 2026 is as unpredictable as 2025, then the lenders that matter most will be the ones that can solve problems across the full stack and make decisions fast enough to keep a deal alive. In this market, a project doesn’t fail because demand doesn’t exist; it fails when timing slips, subsidies move, and too many parties fail to stay aligned,” he says. “We expect lenders to require more contingency, spend more time on sponsor liquidity and guarantor support, and focus on sponsors they believe have longevity with proven track records. The institutions that stay disciplined, support their clients, and move quickly will be the ones with the business.”
Warren adds the most popular execution this year will not be a product, but the relationship.
“In a market this complicated, developers can’t start from scratch every time, so the deals that get done will be with the institutions that know them best: the bank, lender, or syndicator that understands their track record, has seen how they manage a project, and knows how they behave when something goes wrong,” he says. “The sponsors that will get the most attention and best terms are the ones that have earned trust over time, especially if they have shown they can be candid, reasonable, and solution-oriented when a deal hits a bump. The best proof that someone can execute the next deal is how they handled the last one.”