As the community development finance field looks ahead, housing lenders are navigating a period of both uncertainty and opportunity. Sarah Brundage, president and CEO of the National Alliance of Affordable Housing Lenders (NAAHL), works at the intersection of policy, capital markets and the mission-driven lenders responsible for much of the nation’s affordable housing production and preservation. In this conversation, she reflects on what this consequential moment means for housing-focused community development financial institutions (CDFIs) — from shifting federal priorities and persistent capital gaps to the partnerships and policy frameworks that will shape the next decade of affordable housing finance.

Q: How would you describe this moment for affordable housing lenders and what feels fundamentally different about the challenges ahead compared with past cycles?

A: We are facing many challenges, some of them are new and some of them are familiar but reaching new heights. But we also have unprecedented opportunities with political winds at the federal, state and local level. That’s why I would describe this moment as consequential. The systems we’ve built to deliver affordable housing and related services are either going to shrink and some fail, or we could come out of this moment more focused, efficient and impactful.

Q: As federal funding priorities and market conditions change, how are housing-focused CDFIs innovating or adapting to meet the needs of underserved communities while still maintaining financial sustainability and mission impact?

A: The reality is many CDFIs are having to step back from new, innovative, more expansive plans and reallocate their resources to continue to serve their communities without disruption — for now. But we’re still in the early phases of how CDFIs are evolving to these new market conditions, and CDFIs are by design resourceful and resilient. CDFIs aren’t going anywhere and we’re already seeing partners double down on their commitments to CDFI partnerships, new levels of bipartisan and industry support for CDFIs, and leaders in the field considering new sources of capital and the future of the sector.

Q: What does it mean in practice to rebuild or strengthen local housing-finance systems, and how can national intermediaries, policymakers, and funders support place-based strategies without imposing one-size-fits-all approaches?

A: We need to foster local housing finance systems that can weather fluctuations in federal funding, whether it’s obstacles we’re seeing now or historic injections we’ve seen in recent years as well. We’ve learned that we can unintentionally diminish the impact of resources when we are overly prescriptive vs. leaving the flexibility to localities to address their unique housing needs. All the more reason why the deep community knowledge and relationships that CDFIs bring are key to place-based strategies. But while much of housing is local, I’m still a firm believer that we will always need strong federal policy and resources to scale to the needs we see in urban, suburban, rural and Tribal communities nationwide.

Q: Where do you see the most urgent capital gaps in the housing finance stack right now and what kinds of public, private or philanthropic catalytic capital would make the greatest difference?

A: Unfortunately, there are capital gaps in every way you can cut housing: from predevelopment to maintaining long-term affordability, for new production and substantial rehab, for permanent supportive housing to middle-income housing, for multifamily to starter homes. We need new funding that is fast and flexible. I often think we need to get capital to those with proven track records of mission-driven housing production and preservation and then get out of the way.

Q: NAAHL has emphasized the importance of sustained federal funding not just for increasing housing supply but also for preserving existing affordable homes and preventing disruptions that can jeopardize housing stability. How do you see the interplay between preserving existing affordable housing stock and expanding new production?

A: Housing supply is part of the national conversation in a way we haven’t seen for decades, and the “build, build, build” narrative is often the loudest. But housing supply is about building new housing and preserving the existing stock. I see production and preservation as going hand-in-hand in our collective efforts to provide more affordable housing. Tenants and communities don’t only need new housing; they also need to have healthy, quality housing and housing stability over the years. Policy, capital and partnerships should support both/and, not either/or.

Q: What would stability look like for the affordable housing finance field?

A: The housing needs of our communities will continue to change with the economy, demographic shifts, natural disasters and many other factors that we can’t always predict. And while I think there will always be a need for more affordable housing in our country, some measures of success we should all strive towards are a significant decrease in unhoused Americans, an increase in housing choice and affordability so that housing costs don’t take up such a great share of household income, and a lower average age for first time homeowners. To get there, we will need a range of public, private and nonprofit solutions, the ability to innovate and improve how we operate, greater community engagement and political will, and above all, stability and less distractions from the work that so many are dedicated to.