Multifamily & Apartment Financing in District Of Columbia

The District of Columbia (DC) continues to be one of the most active jurisdictions for multifamily development in the United States. In 2026, the landscape is defined by the Mayor’s $100 million annual commitment to affordable housing and a strategic pivot toward office-to-residential conversions as the commercial sector stabilizes.

Core Public Financing and Gap Funding

Because of DC’s high land and construction costs, public "gap" financing is often required to make projects feasible, particularly those serving low-to-moderate income residents.

• Housing Production Trust Fund (HPTF): Administered by the Department of Housing and Community Development (DHCD), this is the District's primary tool. By law, at least 50% of HPTF funds must serve households at or below 30% AMI (Area Median Income). In the FY 2026 budget, it remains a cornerstone with $100 million in dedicated funding.
• DC Housing Finance Agency (DCHFA) Bonds: The DCHFA issues tax-exempt and taxable Multifamily Mortgage Revenue Bonds (MMRB). These are frequently paired with 4% Low-Income Housing Tax Credits (LIHTC) to provide low-cost construction and permanent debt.
• Local Rent Supplement Program (LRSP): Often used in tandem with HPTF, this program provides ongoing operating subsidies to help developers cover the gap between market-rate operating costs and the rents paid by extremely low-income tenants.
• McKinney Act Savings Loan Fund: A DCHFA program providing short-term "bridge" or pre-development loans for the acquisition and initial costs of affordable housing projects.

Regulatory Framework and Incentives

Financing in the District is uniquely tied to specific local regulations that impact a project's capital stack and exit strategy.

• Tenant Opportunity to Purchase Act (TOPA): A critical factor for any acquisition financing. Tenants in DC have the right of first refusal to purchase their building. Developers often secure financing to partner with tenant associations to preserve affordability.
• Inclusionary Zoning (IZ): Most new multifamily developments are required to set aside 8% to 10% of residential floor area for affordable units, a factor that is baked into early-stage construction loan underwriting.
• Office-to-Residential Conversions: In 2026, DC has expanded tax abatements (such as the Housing in Downtown program) to incentivize the conversion of underutilized office space into high-density residential units.

2026 Market Trends and Debt Environment

The private lending market in DC is currently in a "restabilization" phase following a period of significant supply delivery.

• Supply Absorption: Major submarkets like Navy Yard and Union Market are working through a massive wave of inventory delivered in 2024–2025. Financing for new "ground-up" luxury projects is currently more difficult to secure than financing for "workforce" or "affordable" housing.
• Agency Lending Caps: For 2026, the Federal Housing Finance Agency (FHFA) has maintained loan purchase caps of $88 billion each for Fannie Mae and Freddie Mac, with a strict requirement that 50% of their volume be "mission-driven" affordable housing.
• The "Flight to Quality": Commercial banks are favoring stabilized assets with strong Debt Service Coverage Ratios (DSCR), often requiring 1.25x or higher for non-recourse permanent debt.