Could County Create Affordable Housing Loan Fund?

Layton Preserve affordable housing development in Greenfield developed with financing. Photo taken March 6, 2025 by Graham Kilmer.

Milwaukee County may explore creating a revolving loan fund for affordable housing developments.

A revolving loan fund is a pool of capital, typically managed by a governmental entity or a non-profit, providing short-term loans to projects and then using the interest on repayments to fund more loans. They can provide gap financing for projects that are difficult to finance through private lenders, like affordable housing.

State and local governments around the country have started using revolving loan funds to finance affordable housing projects, to speed up development and eliminate the uncertainty of the federal funding process. The funds have proven a new way for the governments to develop public housing.

Supervisor Shawn Rolland sponsored an amendment to the 2026 budget asking county staff to research revolving loan funds and develop a report outlining how the county could set one up. The county needs more affordable housing, and more housing to be developed, Rolland told members of the Committee on Finance, adding that supervisors have heard from members of the public that a revolving loan fund could help.

“So there’s a want and an interest in it,” Rolland told the committee. “I think there’s also a lot of questions that remain unanswered.”

The committee approved the amendment and the full board will vote on it when it adopts a 2026 budget.

In recent years, the county has used public funding to leverage development of affordable housing units. The county’s structural budget deficit hasn’t left policymakers with much cash to invest in housing development, but that changed with the COVID-19 pandemic and release of federal stimulus funds through the American Rescue Plan Act (ARPA).

The county pumped millions of ARPA dollars into affordable housing development throughout the county. It even used ARPA funds to leverage the development of 120 new, affordable single-family homes in Milwaukee’s central city. The homes will be sold to first-time homebuyers at prices well below the market rate.

Financing is often a barrier to building affordable housing. Typically, affordable units are developed with financing from the federal government through block grants or Low-Income Housing Tax Credits. A revolving loan fund allows projects that would otherwise require federal financing to more quickly secure funding for affordable housing from a local lender.

The Center for Public Enterprise, a Brooklyn-based think tank focused on public sector economic development, has called revolving loan funds “one of the government’s most effective tools: a way to turn a one-time invest into a lasting source of financing for projects and sectors the private market deems insufficiently profitable but which deliver needed public benefit.”

A revolving loan fund can streamline financing for developers building affordable housing. Not only does it allow them to sidestep the federal grant process, it can also produce a simpler financing stack (similar to those used for a market rate project), rather than layering four or five sources of equity on top of tax credits, the think tank noted.

A revolving loan fund set up by Montgomery County, Maryland has become a poster child for the financing model. The Montgomery County Housing Opportunity Commission (HOC)created a $100 million revolving loan fund that, in fewer than five years, has developed 268 units of mixed-income housing and created a pipeline with more than 2,600 units in various stages of development. Montgomery County plans to use the fund to finance the development of 6,000 units over a period of 20 years.

The first building developed with financing from the Montgomery County fund is the 268-unit mixed-income apartment building called the Laureate. The county partnered with a private developer to finance the project, providing lending through the fund in exchange for a majority ownership stake in the building. One-third of the units in the building are set aside for residents making less than the area median income.

“As majority owner, HOC set the standards for affordability, sustainability, and quality of design, while the day-to-day property management for the project is handled by their development partner,” according to a report by the Center for Public Enterprise. “The project was underwritten to support the maximum number of affordable units without jeopardizing the long-term financial viability of the project.”

In Milwaukee, public financing for affordable housing developments does not typically yield publicly-owned housing. County ARPA funds were disbursed as grants. The City of Milwaukee maintains a housing trust fund that invests in affordable housing projects, but those, too, are grants.

To set up a revolving loan fund in Milwaukee, the county will need to create a public entity to manage the fund. It will also need seed capital, which could prove difficult for the county to fund on its own. It has run out of federal stimulus funding and returned to a period of annual budget deficits for the foreseeable future.