THE FWD #267 • 763 words
CDFIs Are a Unique Tool Communities Can Use for Affordable Housing
Guest blog: Zach Fitzpatrick with Virginia CDFI Coalition and Laura Dupuy with VCDC
Community Development Financial Institutions (CDFIs) aren’t exactly a dinner table topic, but they should be. Born out of the Civil Rights movement and then formally established through the CDFI Fund within the U.S. Treasury in 1994, CDFIs contribute to addressing systemic inequality in our financial system by investing in communities that conventional finance frequently ignores.
The CDFI industry began with fewer than 200 organizations and traces its origins back to the 1970s. Today there are more than 1,300 federally certified institutions nationwide; This includes banks, credit unions, minority depository institutions, and loan funds all oriented around the same core idea of increasing equitable access to capital. CDFIs expand economic opportunities for marginalized communities by providing access to equitable, low-interest financing for local residents and businesses. CDFIs reinvest their earnings directly into the communities they serve, ensuring that capital remains local. According to the Opportunity Finance Network, in 2024 alone, CDFIs supported communities and developers in creating or rehabilitating 98,451 affordable housing units.
CDFIs are essential for housing because they can fill the gaps that a traditional, more risk-averse lender might avoid, like low-income communities, smaller nonprofits, or projects with thin margins. One of the most valuable contributions CDFI’s make to their customers is flexible underwriting standards and expanded access to financial products. These organizations can often pair financing with technical assistance. For a first-time homebuyer or a nonprofit developer trying to navigate complex affordable development projects, that guidance is as valuable as the loan itself.
The Federal Threat
Here’s where things get complicated. Both the FY26 and FY27 federal budget proposals and the President’s Budget Request have taken aim at the CDFI Fund. The current request would eliminate all existing CDFI programming and replace it with a $100 million “Rural Financial Assistance Program.” For an industry that leverages federal seed money into billions of dollars of private capital, that’s a serious threat.
In April, the House Financial Services and General Government Committee approved FY27 appropriations, allocating $276.6 million for the CDFI Fund. This amount represents a $42.6 million reduction compared to FY26 appropriations and includes funding authority for the Bond Guarantee Program. However, it is important to note that the FY26 appropriations have not yet been released to the Treasury Department by the Office of Management and Budget.
In February of this year, Senator Warner (D-VA) introduced the AFFORD Act with Sen. Daines (R-Mont), which would increase transparency for CDFI Fund operations and strengthen its role in providing capital access to underserved communities. The bill would also extend and enhance the CDFI Bond Guarantee Program to enable participation by smaller CDFIs and would reauthorize the CDFI liquidity enhancement program, increasing CDFI lending capacity to reach more communities nationwide. Additionally the The 21st Century ROAD to Housing Act has provisions included to strengthen the role of community-based lenders like CDFIs.
These federal funds are tantamount for CDFIs continuing their work within underserved markets nationwide, as federal programs enable CDFIs to provide the underwriting and loan terms that communities are looking for.
Virginia’s CDFI Ecosystem
Virginia has roughly 19 certified CDFIs, and the VA CDFI Coalition brings together more than 30 organizations, CDFIs, advocacy groups, and community development institutions, to advocate collectively for equitable access to capital across the Commonwealth.
About 10 of those CDFIs work directly in housing. What does that mean on the ground? It can mean construction financing, permanent mortgages, home equity lending, or the equity investment that makes a tax credit deal pencil out. Virginia CDFIs have financed over 25,000 affordable housing units since 2005.
With over 35 years of lending, collaborative partnership, and equity investments, VCDC has helped create more than 12,000 homes in Virginia and beyond. Their recent investment in Greenway Village in partnership with Commonwealth Catholic Charities Housing Corporation will create 56 units for families at 40 – 60% of Area Median Income in Richmond’s Northside community. This project included over $9 million in Low-Income Housing Tax Credit equity, alongside a low interest construction loan of $1.3M from VCDC’s lending affiliate VCDC Community Lenders.
If you work in affordable housing, you’ve probably already crossed paths with a CDFI, you may not have even realized it!
Want to learn more? The VA CDFI Coalition is hosting the 2026 VA CDFI Summit on August 18th in Richmond — a full day of strategy and conversation with CDFIs, policymakers, and financial institutions shaping the future of community development finance in Virginia.