Brief Warns Cuts To Cdfi Fund Could Harm Local Economies

The National Association of Affordable Housing Lenders (NAAHL) and the Center for Affordable Housing Lending released a new policy brief highlighting the bipartisan role that Community Development Financial Institutions (CDFIs) play in channeling private capital into underserved communities. They also warn that weakening federal support for CDFIs could undermine local economies.

The brief, which details how CDFIs close the gap between what communities need and what the traditional market can provide, outlines how CDFIs finance affordable housing, small businesses and essential community facilities.

“CDFIs play a critical role in bridging the gap in capital for communities that have historically been marginalized in the financial system,” said Sarah Brundage, president and CEO of the NAAHL.

The report describes CDFIs as “mission-driven lenders” that balance financial sustainability with a focus on borrowers and markets that fall outside conventional underwriting standards.

“It’s a business model that channels private investments into what communities need,” Brundage noted in the brief, citing examples ranging from disaster recovery to affordable housing for seniors and veterans.

At the center of the model is the federal Community Development Financial Institutions Fund, created by Congress in 1994 and housed within the U.S. Department of the Treasury. The fund certifies CDFIs and administers programs, including the New Markets Tax Credit and the Capital Magnet Fund.

According to Treasury data cited in the report, each dollar of CDFI Fund financial assistance historically has leveraged about $8 in private investment. Since its inception, the fund’s awards have helped catalyze hundreds of billions of dollars in private capital for low- and moderate-income communities, the brief states.

The report comes as lawmakers continue to debate federal spending priorities.

In 2025, more than 100 members of Congress sent a bipartisan letter to Treasury Secretary Scott Bessent and Russell Vought, director of the White House Office of Management and Budget, urging the Trump administration to continue carrying out the statutory obligations of the CDFI Fund.

The brief urges Congress to maintain stable funding and regulatory support for the CDFI Fund, arguing that predictable federal backing allows CDFIs to make long-term commitments. Though modest in size, the report explained, federal investment in CDFIs is “catalytic,” drawing significantly larger amounts of private capital into underserved communities.

Banks as key partners

The brief emphasizes that banks are major investors in CDFIs, often to meet obligations under the Community Reinvestment Act, which encourages lenders to meet the credit needs of the communities in which they operate.

Major financial institutions have publicly detailed their CDFI commitments. For one, Bank of America reports investing more than $2 billion with 250-plus CDFI partners nationwide. The report also noted that Capital One has pledged $600 million in support of CDFIs as part of a broader $265 billion community benefits plan tied to its acquisition of Discover.

Other focus areas

The report points to affordable housing as a central focus. In fiscal year 2022, recipients of financial assistance from the CDFI Fund financed more than 54,000 affordable housing units.

CDFIs provide predevelopment, acquisition and construction loans, often layering funding sources such as Low-Income Housing Tax Credits (LIHTC). They also finance first-time homebuyers who may fall outside traditional underwriting standards but show an ability to repay.

Nationwide, CDFIs issue about $2 billion in mortgages annually, according to the Opportunity Finance Network.

Small-business lending is another key role. CDFI Program awardees have financed more than 100,000 businesses annually in recent years, the report stated, supporting entrepreneurs who may not qualify for conventional loans. Opportunity Finance Network members collectively have helped create or maintain 3.4 million jobs.

CDFIs’ reach is crucial in rural and tribal communities, where bank closures have limited access to credit. Native CDFIs specialize in lending that accounts for tribal sovereignty and trust land status. Some 5.6 million rural households are considered cost-burdened, spending more than 30% of their income on housing, the report notes.

CDFIs also act as financial first responders after disasters, offering emergency business loans, bridge financing and home repair loans when traditional lending slows.