Growing demand for generative AI has created a problem for local governments: Data centers, the facilities that power AI models, have spurred economic growth, but they also strain energy grids, may increase electricity costs, put the environment at risk, and have raised community concerns. With local leaders searching for ways to address the growing demand for and negative externalities of data centers, one community—Henrico County, Virginia—has found a creative and politically savvy solution to address two local problems in one.

Using tax revenue from data centers, Henrico County seeded a new affordable housing trust fund to fuel homeownership and long-term housing affordability. This financing means developers don’t need to rely on federal programs with long processes and complex compliance hurdles. And it fills a critical gap left by federal initiatives that are rarely designed to help families with low and moderate incomes purchase homes.

Henrico County’s model demonstrates how a county can turn a potential liability—rapid data center growth—into a community asset. By pairing predictable local funding with land banking and shared-equity tools, local governments can make housing both attainable and enduring.

A unique local funding model

Local funding is often the missing link in housing production. Even when state and federal programs exist, they typically require local matching funds or site control, barriers that can stall projects for years and prevent rural communities and those without staff capacity from accessing funds.

Rather than relying on scarce federal dollars, Henrico County made an appropriation of $60 million in previously unbudgeted data center revenues to launch its Affordable Housing Trust Fund. The fund is projected to support the construction of roughly 150 homes per year for moderate-income buyers earning between 60 and 120 percent of the area median income, allocated over the next five years.

This approach doesn’t just expand affordability, it helps developers avoid the red tape and cost burdens associated with traditional federal funding streams, such as the HOME or Low-Income Housing Tax Credit programs. By using funds generated from new economic activity, Henrico County can match or replace federal dollars, rather than waiting for unpredictable appropriations.

County leaders emphasized that many communities lack flexible “patient capital” for land acquisition or early-stage development—funding that land banks and community land trusts could deploy effectively if rules allowed. Henrico County’s model offers several lessons other localities can emulate:

• Seeding a large initial amount of capital—$60 million from data center business property and real estate tax revenues for Henrico County—into an Affordable Housing Trust Fund, ensuring immediate availability for housing projects.
• Having an in-the-know organization—the Partnership for Housing Affordability (PHA), a regional policy organization that advocates for and supports affordable housing initiatives in the Richmond area—administer the trust fund.
• Supporting more affordable housing through grants to developers and community trusts. PHA deploys funding to nonprofit and for-profit developers who commit to lowering the cost of new homes for first-time buyers with low and moderate incomes. PHA also allocates some of the funds to the Maggie Walker Community Land Trust, an organization that ensures homes remain affordable in perpetuity.
• Waiving building and utility hookup fees for developers and fast-tracking permits for projects that include affordable homes to reduce both costs and delays.

Opportunities for federal policymakers to support this model

The federal government can support and scale models like Henrico County’s in the following ways:

• Create tax incentives for below-market “bargain sales” and for sales to community land trusts or nonprofits for less than market value. These tax benefits would make it easier for mission-driven organizations to acquire land for affordable housing before it’s lost to speculative development.
• Review and modernize requirements on state and federal programs on small-scale affordable developments (such as Davis-Bacon requirements) while maintaining strong necessary protections for workers, residents, and communities. Updated requirements could reduce unintended cost burdens for developers, leading to lower housing costs for potential buyers and renters.
• Encourage sustained, flexible local funding by allowing innovative revenue streams to serve as local matches in federal programs.
• Embed shared-equity homeownership as an eligible use in programs like HOME and the National Housing Trust Fund. Doing so would allow localities to create or support entities that share the costs and ownership of a home with households with low incomes to make the home more affordable.

At a time when housing costs are rising faster than wages, this kind of cross-sector creativity deserves federal attention. As local governments explore ways to strengthen local housing ecosystems, Henrico County’s innovative model offers a powerful example of what’s possible when economic development and housing policy work hand in hand.