Optimizing Affordability: A Statistical Analysis of State Housing Finance Agency Down Payment Assistance Program and Outcomes

This Capstone project, conducted for Jefferies Financial Group, examined how State Housing Finance Agencies (HFAs) use Down Payment Assistance (DPA) programs and bond financing to address worsening housing affordability across selected U.S. states. The team focused on three connected questions: how affordability pressures differ across states, how HFA single-family program balance sheets have evolved, and how DPA program design relates to borrower reach, financial sustainability, and bond market outcomes.

The team analyzed macroeconomic and housing data, audited HFA financial statements, DPA program information, and HFA bond issuance data from 2014 to 2025. The analysis found that affordability pressures are increasingly structural, as home prices have outpaced incomes and elevated mortgage rates have raised barriers for first-time and moderate-income borrowers. HFA balance sheet analysis showed significant variation across states, with some agencies maintaining stable single-family program assets while others, such as Illinois, Colorado, and Utah, expanded substantially. DPA analysis highlighted a key policy trade-off: deferred programs tended to reach more borrowers and operate at greater scale, while non-repayable programs provided deeper support per household but were less scalable.

The bond market analysis found that HFA issuance increased after 2022, with greater reliance on taxable financing as tax-exempt capacity became more constrained. Although DPA activity was associated with larger funding needs, it had limited explanatory power for bond spreads. The team recommended more standardized DPA reporting, greater attention to repayment structure, and program designs that balance borrower impact with long-term HFA financial capacity.