Revolving loan funds: The next big thing in housing?

In the housing world, Montgomery County has become an American Vienna, a place journalists and government officials visit to learn about its innovative housing policies. Its $100 million revolving loan fund, established in 2021, has already yielded 268 completed homes, with an additional 463 homes under construction and another 413-unit project set to break ground mere hours from this writing.

A wave of cities and states have followed the Maryland county’s lead. From Massachusetts to Michigan, New York to Utah, policymakers view these funds as a simple, high-impact, and relatively cheap way to stimulate the development of new homes.

The pitch gives itself: A one-time contribution to such a fund can be leveraged many times over, and recycled from project to project, generating new homes for a much more modest per-unit investment than just about any other housing program.

These funds, which primarily help produce mixed-income and middle-income homes, are an indication of policymakers’ growing interest in addressing the broader housing shortage, not just the housing needs of the lowest-income Americans. They demonstrate a growing willingness on the part of local and state governments to intervene in housing markets, as well as a growing recognition that the affordable housing crisis will not be solved without private capital contributing significantly.

I took a deep dive into revolving loan funds in my latest piece for Remapping Debate. The piece is, I believe, the most comprehensive look yet at what has become the hottest trend in housing policy. I explore:

• The financial mechanics of these programs, in as plain language as possible

• How these programs spread from Montgomery County to places like Utah and Massachusetts

• How different models work and what differentiates them

• Early results of these programs from outside of Montgomery County, including one disappointing case study

• The political fault lines that have emerged around the creation of these programs

• The prospects for the continued spread of revolving loan funds, including at the federal level

Read the whole story here.