A gap in financing occurs if there is a difference between the total cost to develop and the total amount of funding (debt plus equity). Common options to fill gaps:

• Commit more of your own or an investor’s equity to the project.
• Incorporate energy-efficiency measures, which will lower operational costs and increase NOI.
• Use grants or subsidies.

Grants come from foundations, private family offices, or city, state or federal agencies and help support their providers’ missions.

A subsidy is funding provided by a level of government (municipal, county or state) and made available to a project because it’s been deemed by the issuing agency to provide a public good.

• Consider tax benefit programs.

Tax abatements reduce an owner’s local real estate taxes.

Tax credits are administered by state and federal agencies and allow owners to obtain additional equity by selling the credits to investors, who use them to offset federal taxes.

Payment in lieu of taxes (PILOT) is an arrangement made to compensate a local government for property tax revenue that it loses because of the tax-exempt nature of the ownership of a property or of a property itself.

Tax exemptions reduce the value of a property for tax purposes so an owner’s tax bill is lowered, generally for a finite period of time.