Using HOME and HTF Funds within Opportunity Zones

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The Essentials of OZ, HOME, and HTF Programs

Financing affordable housing is challenging. In recent years, it has become common to use several funding sources in combination in one project to make it financially feasible. The affordable housing finance industry has responded to these challenges with evolving strategies to increase the amount of funding available to develop housing for America’s low-income families.

Most affordable housing projects are financed with one or more sources of public subsidy or tax credits.

  • Public subsidies, like the HOME and HTF programs, are often loaned or granted directly to affordable housing projects to make up the difference between what the market will bear and the actual cost of the development (i.e., bridge the financing gap). Grantees look to stretch these limited dollars by identifying other sources of funds for their projects.
  • Tax credits, such as those available through the Low-Income Housing Tax Credit (LIHTC) program, can be used alone or in combination with public funds. Tax credits enable investors to reduce their tax liability while also earning a return on their investment in affordable housing. The Internal Revenue Service (IRS) caps the total amount of LIHTC tax deduction, and the credits are allocated by designated state agencies.

The OZ program is a new source of financing that differs from block grants and tax credits, but can be used in conjunction with these traditional financing sources to provide additional capital for affordable housing development.

The OZ program permits taxpayers who earn a capital gain on their investments to invest that capital gain in designated low-income areas, rather than pay taxes on it. Unlike tax credits, taxpayers that owe capital gains can invest directly in a qualified OZ. Whereas the pool of LIHTC investors is primarily limited to large institutions, the OZ program provides benefits that attract investment from individual taxpayers.

The OZ program is designed to spur many types of economic investment in communities that suffer from disinvestment. Affordable housing is one such eligible investment activity, provided the housing is located in an OZ. Grantees should explore the potential of this relatively new revenue source and see if they can take advantage of these funds in their communities.

The HOME, HTF, and OZ programs each have their own goals, purposes, and requirements. Grantees that want to take advantage of the potential revenue source available to a project located in an OZ will need to ensure compliance with all applicable requirements.

Tax Liability

Taxpayers with a tax liability due to capital gains can invest their capital gain (rather than pay tax on it) into an economic development activity in an OZ, including the development of affordable housing.


To take advantage of capital from OZ investors, grantees must comply with HOME or HTF regulations and IRS OZ requirements.