Grant Writing Tip: Using federal grants to fund building or purchasing/renovating a building

We get many calls from nonprofits and public agencies seeking federal grants to build or buy and renovate a building*—the proposed uses could be anything from a youth center to a SUD treatment facility to affordable housing. Most callers are surprised to learn from us that the federal government has relatively few programs to fund building construction or acquisition/renovation of buildings of any type. If you jumped into the Time Tunnel to travel back to the ‘60s and 70’s with me, we’d find lots of federal grant programs for this purpose, with the mother of all facility funding programs being public housing, along with many other programs for affordable housing, health centers, emergency operations centers (EOCs), and so on.

What changed? By the time we got to the ‘70s in our adventure, we’d learn that public housing had earned the wrath of both the left since it was part of the overall post-WW II urban renewal effort (lefties called it “urban removal”), and the right which saw this as growing the evil “welfare state.” The construction of public housing dwindled over the years with the last being built well before the passage of the Faircloth Amendment in 1998 that effectively ended the program. As public housing fell out of favor, so did other direct housing financing programs like HUD’s long forgotten Sections 235, 236, and 221(d)(3) programs. The Housing and Community Development Act of 1974 created the Community Development Block Grant (CDBG) program, which eliminated dozens of HUD discretionary, competitive grants programs in favor of an annual non-competitive allocations to “entitlement jurisdictions” (see below for more details on CDBG). Congress in effect transferred funding for housing and community facilities from the federal government to the states and large cities/counties. When President Reagan arrived, Section 8 vouchers replaced public housing in 1983: in most cases Section 8 (now known as Housing Choice Vouchers or HCVs) did not fund new construction, but rather gave poor folks vouchers for subsidized rental of existing units. A similar process unfolded for many other federal grant programs for funding facilities.

Taking the Time Tunnel back to 2024, we’re in a time when it’s much easier to get federal grants for facilities in rural areas than cities and suburbs. The most flexible federal grants and subsidized loans for facilities are now found in USDA to benefit low-income rural areas. Here are two examples of USDA programs in rural areas:

• The UDSA Community Facilities Direct Grants and Loans provides funding to develop essential community facilities in rural areas. Facilities are considered “essential” if they provide critical services that promote the development of rural communities, such as town halls, health care facilities, transitional housing or childcare facilities, public safety facilities, utility services or educational facilities. In practice, this means almost any type of facility that can somehow be justified through the magic of grant writing. In FY ‘23, $3.8 billion in grants and direct/guaranteed loans* were made. Eligible recipients are towns, cities, villages, and townships with populations under 20,000 residents that have median household incomes under the state non-metropolitan median household income (SNMFI). FY ’23 grant awards ranged up to $10 million, with an average of $285,000, while direct loans ranged up to $98.6 million, with an average of $4.5 million and guaranteed loans to $52.6 million with an average of $9 million.
• The USDA Community Facilities Program Disaster Repair Grants provide funding to nonprofits, federally recognized tribes, and local governments to repair eligible essential community facilities damaged by Presidentially Declared Disasters. A match is required. The highest level of federal participation (75%) is available for communities with a population under 5,000 and the higher of a median household income (MHI) under the poverty level or 90% of the SNMFI.

Following are examples of some other federal grant programs that will fund certain aspects of capital projects:

• The HUD Continuum of Care (CoC) Builds (CoCBuilds) program is a new initiative that provides funding within CoC geographic areas to address and reduce persons experiencing homelessness by adding new units of permanent supportive housing (PSH) through new construction, acquisition, or rehabilitation through one-time CoC Builds awards under the CoC Program. Randomly, HUD just published the FY ’25 NOFO. There’s $175 million available with grants to $12 million. Public agencies, nonprofits, Indian Tribes, and PHAs are eligible applicants. But you must act fast as the deadline is November 21.
• DOC Economic Development Administration (EDA) Public Works and Economic Adjustment Assistance (PWEAA) which accepts applications on a rolling basis until existing funds are expended or a new PWEAA notice of funding is published (the last notice was published in 2023). PWEAA supports long-term community or regional economic development efforts. Local governments, states and tribal organizations, and nonprofits in cooperation with their city or county are eligible applicants. Awards range from $150,000 to $5 million and vary by the four programs within the PWEAA, which include Public Works, Economic Adjustment Assistance, and Assistance to Coal, Nuclear Closure and Biomass Closure Communities. A match is required.
• DHS FEMA Assistance to Firefighters Grant (AFG) program. While construction or acquisition costs are not eligible, AFG will support retrofitting or modification of facilities. Eligible applicants are fire departments, nonaffiliated emergency medical services organizations, and state fire training academies. There was $324 million available in FY ’23, with grants up to $3 million, depending on the jurisdiction’s population and a modest match is required.
• DHS FEMA Building Resilient Infrastructures and Communities Program which provides support to communities for hazard mitigation activities that promote climate adaptation and resilience with respect to the growing hazards associated with climate change. Program priorities for the last solicitation were to incentivize natural hazard risk reduction activities that mitigate risk to public infrastructure and disadvantaged communities, incorporate nature-based solutions, enhance climate resilience and adaptation, and facilitate the adoption and enforcement of the latest published editions of building codes. Eligible applicants are states, territories, and tribal governments, but local governments may apply as sub-applicants through their state, provided that a major disaster declaration has been made under the Stafford Act in the seven years prior to the annual application period and have an approved state or tribal hazard mitigation plan in place. There was $1 billion available in FY ‘FY ‘23 was $1 billion, award size varies from $2 million to $50 million, with a match required.
• The Defense Community Infrastructure Program addresses deficiencies in community infrastructure, supportive of a military installation, to enhance military value, installation resilience, and military family quality of life. Eligible applicants are states, local governments, and nonprofit member-owned utility services owning infrastructure outside of, but supporting, a military installation. A military installation is defined as a base, camp, post, station, yard, center or homeport facility for a ship or other activity under the jurisdiction of the Department of Defense. Construction and renovation costs are eligible. Community infrastructure projects are wide-ranging and can include transportation projects or community facilities including schools, hospitals, fire, police, and other emergency response services. Utility infrastructure projects are also eligible and can include gas, electricity, cyber safety, telecommunications, water and wastewater projects. There was $100 million in funding available in FY ’24 with awards ranging from $250,000 to $20 million and a match is required.
• Department of Energy Renew America’s Schools Prize to Cooperative Agreement program which supports energy efficiency and renewable energy projects at K – 12 schools to lower energy costs and improve air quality. In addition to planning grants, this funding supports the implementation of infrastructure improvements in schools, with a focus on local educational agencies (LEAs) that qualify as rural and/or high poverty. Eligible applicants are LEAs and one or more of the following: schools, nonprofit organizations, for profit organizations, or community partners. Energy improvements may take the form of repairs, renovations, or installations to the facility envelope, air-conditioning system, ventilation system, heating system, domestic hot water heating system, compressed air system, distribution system, lighting system, power system, and/or controls of a building. Projects may also include renewable energy improvements such as rooftop solar, micro wind turbines, alternative fueled vehicle infrastructure, and purchase or lease of alternative fueled vehicles. There was $180 million available in FY ’23 with implementation grants ranging from $7 to $14 million and a match is required.
• The HUD CDBG program, as noted above, provides formula grants to cities and counties with populations over 50,000 that meet certain socioeconomic criteria, which are referred to as entitlement jurisdictions, as well as states that administer CDBG funds in rural and other non-entitlement areas. Each entitlement jurisdiction receives an annual CDBG formula allocation from HUD. CDBG funds can be used to create suitable living environments, expanded economic opportunities, neighborhood revitalization, and to support construction or acquisition/renovation of an array of community facilities. Eligible activities include planning and implementation to rehabilitate structures, provide public services, and construct or improve public facilities, provided that the project meets priorities stated in required planning documents and the project meets at least one of CDBG’s eight statutory requirements (i.e., low- and moderate income benefit, etc.) Each entitlement jurisdiction prepares a five-year Consolidated Plan, which is updated through Annual Action Plans. The Annual Action Plan development process includes an opportunity for local nonprofits to submit funding proposals. Applicants outside of entitlement jurisdictions must apply through their state CDBG program, which run annual RPF processes.

Despite the gloomy news above, as the feds have retreated from most capital grants, state and local governments have expanded such funding, often combining federal funds with revenue from state or local taxes. Many cities and states also issue tax-exempt bonds to fund capital costs for buildings and local governments and nonprofits are usually eligible applicants. In particular, California often issues RFPs for many voter-approved bond issues for parks, recreation/community centers, etc. In addition, nonprofits organizations frequently initiate capital campaigns for facilities, which are usually a combination of seeking donations from local individuals and businesses of good will and a foundation appeal. Foundations are often a better source of capital funding for facilities than government grants.

* Previous Seliger and Associates posts on federal funding for facilities includes “Seliger’s Quick Guide to Developing Facility Grant Proposals and Budgets” from 2015 and The Challenges of Seeking Grants for a New Facility from 2014.

** Many of our clients are initially leery of applying for a grant with an associated loan component until we explain how these loans usually work in the real world. These loans always have below market interest rates, have favorable repayment terms (sometimes including forgiveness if certain conditions are met), and are subordinated to other mortgages. As a practical matter, such loans are more or less delayed grants, since it’s very unlikely that a federal agency would try to foreclose on a youth center!