Housing and transportation are the two largest expenses for most American households, accounting for nearly half of monthly incomes. Building in location-efficient places, where roads, transit, and other infrastructure already exist, can lower both housing and transportation costs while providing families with walkable, connected neighborhoods. The federal government has powerful financing tools, such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) and Railroad Rehabilitation and Improvement Financing (RRIF) programs, to support this kind of growth. However, these programs are not designed to serve the smaller, more numerous transactions that define transit-oriented development (TOD).
Federal policymakers are also exploring complementary strategies, such as converting underused commercial buildings into housing, often located in the same location-efficient areas near transit. This can reduce both transportation and housing costs. The Senate Appropriations Committee has directed the Department of Housing and Urban Development (HUD) to identify federal barriers to office-to-residential conversions and recommend changes to federal law to further incentivize such projects. However, removing barriers is only part of the equation. Federal transportation policy must also evolve to better align infrastructure investment with housing production.
The next opportunity for this alignment comes as Congress considers the upcoming surface transportation reauthorization bill. By making targeted reforms in this bill, Congress can unlock billions of dollars for transit-oriented housing projects that are currently stalled, enabling hundreds of thousands of new homes near transit at no additional cost to taxpayers.
Building more homes near transit can lower transportation costs and boost disposable income for American families while also increasing transit ridership, strengthening local economies, and turning the trillions of dollars federal taxpayers have invested in public transit into lasting value. Research shows that neighborhoods with more housing near job centers are associated with shorter commutes, as households are better able to live closer to where they work. With governments at all levels spending about $80 billion nationally every year to operate and expand their transit systems, it is crucial to make the most of these investments. According to Freddie Mac, the U.S. faces a shortfall of approximately 3.7 million homes, driven by years of underbuilding relative to household formation. Meeting this need requires more housing of all types—affordable, workforce, and market rate—and in all kinds of locations, from established neighborhoods to new communities.
However, much of the new development occurs on the urban outskirts, substituting lower housing costs for higher transportation costs due to longer commutes. Such development also requires substantial taxpayer investment in new roads, utilities, and other infrastructure to serve dispersed growth. One way to lower both housing and transportation costs without adding new taxpayer burdens is to build where roads, transit, and other infrastructure already exist. By building on underused land near transit, vibrant, walkable neighborhoods can be created, giving people more affordable options for where to live and how to get around.
Yet even in places where land, zoning, and infrastructure align, many promising projects never break ground because they cannot secure financing. These projects often require layering multiple funding sources, covering higher upfront costs for structured parking and mixed-use design, and convincing lenders to back unconventional, multi-phase projects. For example, West Haven, Conn., created a transit-oriented development (TOD) district around its new commuter rail station in 2013, aiming to attract walkable, mixed-use projects. Over a decade later, little has been built; city officials say assembling financing has been a major barrier. West Haven is now seeking grants for site cleanup and pedestrian improvements to make the area more attractive to developers. A similar story has played out in San Antonio, where a planned mixed-use TOD at the Scobey industrial site, adjacent to the city’s Centro Plaza transit hub, stalled after the developer backed out. Despite the site’s prime location and strong policy support, officials cited the complexity of financing large-scale, multi-use projects and uncertainty in the commercial lending market as key obstacles.
Traditional bank loan products often carry high interest rates and short repayment terms, but the federal government already has the financing tools and authority to bridge the gap by offering long-term, low-interest loans. By making a few key improvements to these lending programs, Congress can dramatically increase the amount of housing built near transit, all at no additional cost to taxpayers.
Originally created by Congress in 1998 to support large-scale transportation infrastructure, the TIFIA loan program and its sister program, the RRIF program, have evolved into powerful tools with potential for financing mixed-use TOD. Managed by the Department of Transportation’s (DOT) Build America Bureau, both programs provide low-interest federal loans, loan guarantees, and lines of credit for eligible infrastructure and related development. Historically, these loans have primarily gone to public sector borrowers, including state and local governments, transit agencies, railroads, and special authorities, along with a small number of large private concessionaires. Since 1999, the program has committed $37.3 billion in capital expenditure loans—63% for highways and bridges, 31% for public transit, and the rest for rail or multimodal projects.
Over the years, Congress has made substantive changes to expand eligible projects. The FAST Act of 2015 first authorized TOD as an eligible project type, allowing TIFIA and RRIF loans to be used not just for transit stations and related infrastructure but also for certain development on adjacent land. The 2021 Infrastructure Investment and Jobs Act (IIJA) built on that by broadening eligibility to include a wider range of projects within a half-mile of transit, such as housing, retail, and other commercial infill, that improve access to transit and make better use of the surrounding land. In 2021, the Build America Bureau issued guidance implementing these statutory changes and incorporating recommendations from the Government Accountability Office (GAO), formally clarifying how vertical, mixed-use development near transit can qualify.
Despite expanded eligibility, TIFIA and RRIF are not yet structured to serve the smaller, more numerous transactions that define transit-oriented development. A $25 million TOD loan request must go through the same intensive credit review, environmental analysis, and closing steps required for a $400 million toll road. As part of that process, DOT requires applicants to reimburse external financial and legal advisors, which typically range from $400,000 to $700,000, making it more difficult for smaller projects to be financially viable. Knowledge-sharing with potential borrowers is another concern. Most private real estate developers, who lead many TOD projects, have had limited direct interaction with these programs, which were designed with public infrastructure sponsors in mind. For developers, the programs’ investment-grade credit requirements, complex federal compliance obligations, and infrastructure-centric eligibility criteria have made accessing this capital more challenging.
Even with limited market awareness, the Build America Bureau isn’t set up for administrative success. As the volume of TOD applications grows, Bureau staff could become overwhelmed by transaction counts, understandably diverting finite attention and focus toward larger infrastructure projects that more fully utilize available appropriations with current staffing resources, at the expense of relatively smaller TOD project loans. Yet these two programs are poised to do much more. TIFIA continues to retain meaningful unused lending authority. As recently as FY 2018, there was $1.65 billion in unobligated subsidy authority, and the October 2024 TIFIA at 25 Retrospective confirmed that carryover balances remain in place, indicating the program continues to have fiscal firepower to support both large infrastructure projects and a healthy pipeline of smaller TOD projects. The constraint, therefore, is administrative, not financial.
Unlocking TIFIA’s Financing Tools for Smaller-Scale TOD Transactions
This pattern underscores the need for tailored enhancements if we want to unlock TIFIA’s financing tools for smaller-scale TOD transactions. With a few simple improvements, Congress can make these programs even more useful for bridging the financing gap to unlock more housing near transit without new taxpayer spending. Here are three big ideas to unlock TIFIA and RRIF’s potential for transit-oriented development.
Delegate Origination and Servicing to Certified Private Lenders
To enhance the efficiency and reach of the TIFIA and RRIF programs, Congress should authorize—and DOT should implement—a delegated lending model akin to the Federal Housing Administration’s 221(d)(4) program for multifamily housing, the Small Business Administration’s 7(a) loan program, the Department of Agriculture’s Business and Industry Loan Guarantees program, and the Export-Import Bank’s Loan Guarantee program. In these delegated models, approved private lenders originate, underwrite, and service loans according to federal program guidelines, while the federal agency retains ultimate oversight. Under this approach, Congress would establish clear statutory parameters for risk-sharing, including underwriting standards, capital reserve requirements, and default thresholds. DOT and the Build America Bureau would retain portfolio-level oversight, periodic audit authority, and the ability to suspend or disqualify lenders for noncompliance—but would not re-underwrite individual loans. This ensures that federal oversight protects taxpayers while allowing private lenders to apply market discipline and take on risk consistent with commercial real estate lending practices.
Programs such as the 221(d)(4) and 7(a) demonstrate that delegated lending can successfully balance federal risk management with private sector efficiency. They provide useful models for certifying lenders, defining credit criteria, and maintaining oversight without undermining scalability or transaction speed. To further calibrate risk tolerances, Congress could direct DOT to launch a limited pilot program to test default rates, administrative efficiency, and lender performance before full-scale implementation. Lessons from the pilot could then inform permanent statutory parameters and program design. By involving private lenders directly in the loan process, this model ensures that private capital and market discipline are integral to project financing, while also maintaining federal credit safeguards. In sum, delegating these functions would leverage private sector expertise, reduce processing times, accelerate the financing of housing and mixed-use development near transit, and strengthen financial safeguards alongside federally backed loans while crowding in additional private capital.
Leverage TIFIA to Capitalize and Scale Regional TOD Funds
Estados ya pueden solicitar y recibir un solo préstamo TIFIA para capitalizar una cuenta especial que reservan para proyectos rurales en su banco de infraestructura estatal. Esta “aproximación de préstamo combinado”, autorizada bajo la ley actual, permite que múltiples pequeños proyectos—como reparar puentes, mejorar pequeños aeropuertos o incluso construir viviendas transitables en pueblos pequeños—sean empaquetados en un acuerdo de financiamiento único, minimizando los costos de transacción y acelerando las aprobaciones. La autoridad de acuerdo de crédito maestro del Bureau de Construcción de América funciona de manera similar, permitiendo a DOT comprometer un monto total de dólares para un paquete de proyectos relacionados, con préstamos individuales emitidos a medida que los proyectos estén listos. Empaquetar múltiples proyectos en un acuerdo de financiamiento único reduce la necesidad de aprobaciones repetidas, aprovecha el conocimiento y las prácticas de evaluación locales de los estados y libera al personal del Bureau para centrarse en compromisos de infraestructura más grandes. Estas herramientas comparten el mismo principio fundamental: Aprobar el marco de financiamiento una vez y luego financiar múltiples proyectos elegibles a lo largo del tiempo bajo ese marco.
El mismo enfoque podría aplicarse para crear un fondo de préstamos para el desarrollo orientado al transporte, capitalizado por un préstamo TIFIA, para financiar un portafolio de proyectos de áreas de estación y viviendas en el centro de la ciudad. Y con cambios estatutarios dirigidos, el Congreso puede hacer que sea mucho más fácil y eficiente desplegar este modelo a nivel nacional. Un solo préstamo TIFIA o RRIF—por ejemplo, $300 millones—podría capitalizar el fondo y alinear la financiación de TOD con el tamaño típico del préstamo del programa de $380 millones. El fondo proporcionaría financiamiento a bajo interés a proyectos calificados y utilizaría los ingresos de esos préstamos para reembolsar el préstamo federal con el tiempo bajo el horario de amortización negociado y la tasa de interés. DOT mantendría la aprobación del marco general del fondo y la informe anual, pero delegaría las decisiones de nivel de proyecto a la entidad que gestiona el fondo. DOT podría ir más allá al animar acuerdos de crédito maestro “sin visión” (MCAs), donde se hace un compromiso de financiamiento único para un portafolio de proyectos de TOD no aún especificados, y los proyectos individuales se acercan a ese compromiso a medida que se identifican y cumplen con todos los requisitos de TIFIA. Este enfoque permitiría que los proyectos más pequeños avanzaran con el tiempo bajo un marco de aprobación único mientras se preservaban las salvaguardas de crédito y la capacidad administrativa de TIFIA.
Reformas para apoyar un fondo nacional de desarrollo orientado al transporte
El Congreso podría adaptar y ampliar estas herramientas de préstamos combinados y sin visión para apoyar un fondo nacional de desarrollo orientado al transporte, haciendo cambios estatutarios dirigidos para asegurar que una estructura de MCA o similar pueda financiar eficientemente un portafolio de proyectos de áreas de estación y viviendas en el centro de la ciudad. Específicamente, el Congreso podría:
- Clarificar la elegibilidad de TIFIA para el desarrollo orientado al transporte al referirse explícitamente a TOD en las definiciones de proyectos elegibles. Si bien la ley actual ya permite ciertos proyectos de TOD a través de su “provisión de desarrollo conjunto”, nombrar a TOD directamente proporcionaría una dirección más clara a DOT, daría a los solicitantes una mayor confianza y normalizaría el uso de TIFIA para viviendas y proyectos mixtos cerca del transporte.
- Eximir las revisiones ambientales para proyectos pequeños y de bajo impacto. Clarificar que los requisitos mínimos de tamaño de proyecto, solvencia crediticia y seguridad pueden cumplirse a nivel de programa en lugar de proyecto por proyecto. La ley actual ya permite que los requisitos mínimos de tamaño de proyecto, solvencia crediticia y seguridad se cumplan a nivel de programa para proyectos agrupados bajo un compromiso de seguridad común dentro de un MCA. DOT podría clarificar a través de orientación que estos requisitos se aplican al programa general en lugar de a cada proyecto individual, siempre y cuando todos los sub-proyectos cumplan con los estándares ambientales y de elegibilidad aplicables antes de acercarse al MCA.
- Autorizar MCAs revolventes o ininterrumpidas, permitiendo que los reembolsos de préstamos o la autoridad no utilizada se reciclen en nuevos proyectos. Esto transformaría el modelo sin visión en un fondo de préstamos de construcción revolvente, similar a los fondos estatales revolventes utilizados durante décadas para financiar infraestructura de agua y saneamiento, y que se capitalizan en parte con subvenciones federales y luego se sustentan con el tiempo a través de reembolsos de capital e interés. Al igual que esos fondos, un MCA de desarrollo orientado al transporte revolvente permitiría que un solo establecimiento maestro financiara múltiples oleadas de proyectos de TOD a lo largo del tiempo, abordando uno de los puntos de acceso más desafiantes de crédito en el mercado—la disponibilidad de financiamiento de construcción asequible—mientras se mantienen las salvaguardas de crédito fuertes de TIFIA.
- Autorizar aprobaciones de nivel de proyecto delegadas a una entidad de banco de infraestructura estatal calificada, agencia regional u otra entidad pública designada. Bajo la ley actual, el secretario de transporte, actuando a través del Bureau de Construcción de América, debe hacer las determinaciones finales sobre la solvencia crediticia, elegibilidad y cumplimiento con los requisitos estatutarios de cada préstamo TIFIA individual. Esta autoridad no puede ser delegada a una entidad no federal. Un cambio estatutario podría permitir que DOT aprobara el marco general del fondo con anticipación mientras la entidad que gestiona el fondo se ocupa de la evaluación, el cumplimiento y la aprobación final de proyectos individuales dentro del marco.
Juntos, estas reformas permitirían al Congreso adaptar y ampliar las herramientas de préstamos combinados de TIFIA en un fondo nacional de desarrollo orientado al transporte, dando a las comunidades una forma confiable y escalable de financiar proyectos de áreas de estación y viviendas en el centro de la ciudad.
Streamline National Environmental Policy Act reviews for TOD projects
Even with stronger financing tools in place, one of the most significant barriers to timely use of TIFIA for transit-oriented development is the way National Environmental Policy Act (NEPA) reviews are applied when federal funds are involved. In addition to the legislative actions above, DOT could act administratively to improve efficiency by allowing a single NEPA review and creditworthiness assessment to apply to the entire pool, rather than repeating the process for each individual project. This change could be implemented under existing authority and would further reduce costs and timelines for bringing TOD projects to market.
Many TOD projects would not ordinarily require NEPA review if financed solely with private or local dollars. But once TIFIA or other federal programs are used, a NEPA review is triggered, even for projects with minimal environmental impacts, such as redevelopment in already urbanized areas. This can add years of delays and millions of dollars in costs, in some cases deterring local governments and developers from using federal financing altogether. Streamlining NEPA reviews in this context does not mean waiving environmental protections—it means calibrating the level of review to the actual impacts of the project. For example, applying a single programmatic NEPA review to a pool of TOD projects rather than repeating the process for each individual project would maintain safeguards while saving time and resources. Even more effective would be a narrowly drawn statutory NEPA exemption for low-impact categories of TOD, such as urban infill developments, where the environmental benefits of reduced sprawl and vehicle use are clear. Such a statutory exemption would provide the strongest path to accelerated delivery, cutting years off project timelines while maintaining appropriate environmental safeguards for high-impact developments.
By aligning financing tools with streamlined environmental review, Congress could enable pooled TOD funds to provide low-interest financing to qualifying projects, use loan repayments to retire the federal debt under negotiated terms, and unlock more location-efficient housing near transit—all while preserving the Build America Bureau’s capacity to manage large-scale infrastructure commitments.
**Remove TIFIA’s investment-grade credit rating requirement**
Current law requires most TIFIA loans to obtain an investment-grade rating from a nationally recognized credit rating agency before closing. This requirement reflects the fact that TIFIA was initially a tool for financing large, revenue-generating government infrastructure projects such as toll roads and major transit lines. But the investment-grade rating requirement is a poor fit for smaller-scale residential and mixed-use developments near transit. Often, rating agencies will not rate these projects at all because they are small, complex, and lack the single, dedicated revenue stream—ideally with a historic performance record—that infrastructure rating methodologies rely on. For these projects to secure a rating would typically require a guarantee from an entity with an existing investment-grade rating, such as a municipality or housing authority. These entities generally have the ability to issue tax-exempt municipal debt at interest rates competitive with or even lower than the TIFIA rate, which blunts the financial advantage of using a TIFIA loan. In addition, providing such a guarantee can negatively affect their debt service guarantee ratios and increase their contingent liabilities, creating further disincentives to participate. On top of that, obtaining a rating can cost hundreds of thousands of dollars and add months to the timeline—delaying groundbreaking and increasing carrying costs.
Removing the investment-grade rating requirement for residential and mixed-use TOD projects would align TIFIA’s underwriting process with the scale and nature of these transactions and make it more consistent with the RRIF program, which relies on rigorous internal credit assessments rather than a formal rating. Congress could maintain strong risk management standards by allowing credit assessments to be conducted internally by Build America Bureau staff, similar to how other federal loan programs function, including RRIF, the Environmental Protection Agency’s Water Infrastructure Finance and Innovation Act program, the Department of Agriculture’s Community Facilities Direct Loan and Grant Program, and HUD’s Section 108 Loan Guarantee Program. All of these programs rely on robust internal underwriting processes to safeguard public funds without requiring a rating from a nationally recognized credit rating agency. Adopting a similar approach for TIFIA transit-oriented development projects would remove a structural barrier, reduce transaction costs, accelerate approvals, and broaden access to affordable, scalable financing for development near transit.
