Predevelopment revolving loan funds to develop affordable housing: Program features and how they can be strengthened

Predevelopment revolving loan funds (PDRLFs) are pools of money from which loans are made and to which loan repayments flow in. They are a part of revolving loan funds (RLFs) that are extensively used in the US to support small businesses and housing. However, PDRLFs' use for funding affordable housing is little-studied. This paper begins to fill this research gap through a literature review and case studies to better understand the key features and the ways to strengthen affordable housing-focused PDRLFs. Finally, it suggests key strategies to strengthen them further, which include flexible funding by the state and federal governments to seed and recapitalize the funds, the need to proactively seek target loan recipients and support them, balance loan applicants' needs with lending efficiency, and view predevelopment in the context of the entire housing finance process. • PDRLFs are a part of revolving loan funds that are extensively used in the US to support small businesses, housing, and water and wastewater infrastructure. • This paper researches the key features and the ways to strengthen affordable housing-focused PDRLFs. • Need flexible funding by the state and federal governments to seed and recapitalize PDRLFs. • Need to proactively seek target loan recipients and balance loan applicants’ needs with lending efficiency. • Need to view predevelopment in the context of the entire housing finance process.