Preservation Limited Rehabilitation Grant Program

The Illinois Housing Development Authority (IHDA) has released the Preservation Limited Rehabilitation Program 2.0, also referred to as Preservation 2.0, to provide targeted preservation financing for existing affordable housing developments operating under IHDA-imposed affordability restrictions. The program was established to support affordable rental developments facing capital improvement needs that cannot be fully addressed through current operating income or reserve accounts. IHDA intends for the program to stabilize and preserve long-term affordable housing opportunities for low-income and very low-income households throughout Illinois. Approximately $30 million in grant funding has been allocated through IHDA Capital Allocation Funds appropriated pursuant to Section 310 of the State Housing Act. The initiative follows earlier preservation efforts implemented under the Capital Bill Preservation Limited Rehabilitation Program created in 2022 but excludes prior recipients of that earlier funding round from participating in Preservation 2.0. The program is limited to developments that already maintain active IHDA regulatory and affordability agreements restricting at least 25 percent of units to households earning at or below 60 percent of Area Median Income. Eligible developments must have been placed in service at least 14 years before application submission and must demonstrate at least two qualifying distress or preservation conditions. Eligible conditions include immediate physical needs that threaten property sustainability, low REAC scores, failed physical inspections, dangerous conditions, municipal code violations, direct financial risk exposure to IHDA, expiring affordability restrictions, marketability concerns, operational instability caused by rent restrictions, or ownership by a community-based nonprofit organization. Eligible ownership entities include nonprofit organizations, for-profit entities, community-based development corporations, and joint-venture single-purpose entities, provided they demonstrate sufficient technical and financial capacity to complete the rehabilitation work. Funding will be awarded in the form of grants subject to approval by the IHDA Board. Individual awards are capped at $475,000 per development, including a mandatory 10 percent contingency and optional reimbursement of Physical Needs Assessment costs. Funding may only be used for construction-related rehabilitation activities, stabilization work, and approved soft costs associated with property preservation. The program explicitly prohibits the use of grant proceeds for property management fees, legal fees, operating expenses, ownership distributions, developer fees, property taxes, income taxes, or other unapproved purposes. All proposed rehabilitation work must address critical and immediate life-safety deficiencies and municipal code violations identified in a Physical Needs Assessment completed by a certified third-party professional. The PNA must comply with ASTM E2018-15 standards and be no older than 12 months from the application date. IHDA also reserves the right to adjust eligible costs and limit the number of awards allocated to individual applicants. Applications must be submitted electronically through IHDA Connect beginning April 6, 2026, and completed submissions are due no later than May 20, 2026 at 5:00 PM Central Daylight Time. Required submission materials include the completed application workbook, audited or CPA-reviewed financial statements, the qualifying Physical Needs Assessment, supporting PNA summary documentation, and proof of payment for the nonrefundable application fee. Nonprofit applicants must submit a $250 application fee while all other applicants must submit a $500 fee. The fee payment must be mailed separately to the designated IHDA lockbox address in Chicago. IHDA hosted informational sessions on March 2 and March 18, 2026 to assist prospective applicants with program requirements and application procedures. Applicants must obtain access to IHDA Connect and secure a PID before submitting materials, and IHDA advises applicants to allow up to three business days for account processing. Applications will be evaluated according to a 100-point scoring system organized around preservation risk and housing sustainability criteria. The largest scoring categories include existing physical needs and direct financial risk exposure to IHDA, each worth up to 30 points. Additional scoring criteria evaluate risk of affordability loss due to expiring restrictions, organizational structure, marketability challenges, and operational instability. Geographic set-asides distribute available funding across Chicago Metro, City of Chicago, Non-Metro, Other Metro, and Statewide categories to balance preservation resources across Illinois housing markets. In the event of tied application scores, IHDA will prioritize the development proposing rehabilitation of the greater number of units. Applications may also be denied for unacceptable practices such as unresolved compliance violations, recent bankruptcies, mortgage defaults, unpaid IHDA fees, foreclosure events, debarment from public programs, or material misrepresentations. Awarded developments will be required to execute grant agreements, regulatory agreements, and extended affordability restrictions extending at least ten years beyond the expiration of existing affordability covenants. Tax credit developments receiving Preservation 2.0 assistance must waive Qualified Contract rights. Recipients must also comply with Illinois prevailing wage requirements, historic preservation review standards, annual compliance reporting, and periodic physical inspections throughout the extended compliance period. IHDA additionally requires participation in its Asset Management Capacity Building Training and Mentorship Program by a designated organizational representative. Five percent of awarded funds will be retained until successful completion of the training requirements. Rehabilitation activities are expected to occur between December 2026 and June 2029, with draw requests and final inspections continuing through July 2029. Questions regarding the program must be directed to PreservationProgramLimitedRehab@ihda.org.

Applications scoring highest are those demonstrating immediate critical repairs, life-safety issues, direct financial risk exposure to IHDA, and threats to long-term affordability preservation. Applicants should ensure the Physical Needs Assessment clearly documents immediate and long-term capital needs and that narratives demonstrate inability to sustain operations under existing rent restrictions.