Chattanooga proposes $7.8 million affordable-housing loan pool

Chattanooga has proposed applying for a $7,800,250 loan guarantee through the U.S. Department of Housing and Urban Development to create a financing pool for affordable-housing projects within the city.

The proposal is not a final loan approval, and the source packet does not establish whether HUD approved the application after the public-review period. The plan would use federal borrowing capacity alongside city Community Development Block Grant allocations to support housing development for low- and moderate-income households.

How the proposed financing would work

Under an intergovernmental agreement, the Chattanooga Housing Authority would be the direct borrower from HUD. The city would not be the direct borrower. Instead, Chattanooga would pledge current and future CDBG allocations as backstop security for the financing.

The loan proceeds would go into a loan pool for affordable-housing projects developed with qualified development partners. The notice requires the funds to benefit households within Chattanooga city limits, giving the proposal a citywide housing focus rather than a broader regional one.

The proposed structure would allow the city and housing authority to use future CDBG allocations to support borrowing for housing projects. That creates a public-finance obligation tied to those allocations, although the packet does not identify specific projects, neighborhoods, developers or construction schedules.

What the Faircloth limit means in the notice

The notice identifies the Chattanooga Housing Authority’s Faircloth authority limit as 1,287 units. That number describes the authority limit identified in the proposal; it does not mean that 1,287 units have been approved, financed or guaranteed to be built.

The proposal instead establishes a potential financing tool. The city’s stated purpose is to leverage affordable-housing development for low- and moderate-income households through loans to qualified development partners.

Public review and next steps

The draft application and related substantial amendment were made available for public review from May 28 through June 30, 2026. A public hearing was scheduled for June 11, 2026.

Written comments were accepted through 4:30 p.m. on June 30. Those review steps were part of the proposal process and did not themselves constitute HUD approval or establish that housing construction had begun.

The city’s Housing and Community Investment Division described the proposed Section 108 application and the required CDBG backstop in its public notice. The packet does not provide a later decision from HUD, a final financing agreement, a list of funded projects or a construction timetable.

For Chattanooga residents, the immediate issue is whether the proposed borrowing framework moves forward and how any future loan-pool projects would be selected. If advanced, the plan could give the city and its housing authority another way to support affordable housing inside city limits, while tying current and future CDBG allocations to the financing structure.