Brownfield Redevelopment Financing Guide

Brownfield properties, sites with known or suspected environmental contamination, represent one of the most overlooked investment opportunities in commercial real estate. With the right brownfield redevelopment financing strategy, investors can acquire these properties at steep discounts, access generous public incentives, and transform underperforming land into high-value assets. The EPA estimates there are more than 450,000 brownfield sites across the United States, yet only a fraction have been redeveloped. For borrowers willing to navigate the environmental and financial complexities, the rewards can be substantial.

At Clearhouse Lending, we help commercial borrowers structure creative financing packages for brownfield projects, combining private capital with public grants and tax incentives. Whether you are planning a mixed-use conversion, an industrial reuse, or ground-up construction on a remediated site, understanding your financing options is the essential first step.

What Is a Brownfield Site and Why Does It Matter for Investors?

A brownfield is any real property where expansion, redevelopment, or reuse may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. Common examples include former gas stations, dry cleaners, manufacturing plants, and industrial yards. Unlike greenfield sites, which are undeveloped, brownfields carry environmental baggage that must be addressed before new construction or occupancy can begin.

For investors, this environmental stigma is exactly what creates opportunity. Brownfield properties typically sell at 25% to 50% below comparable clean sites, and public agencies at the federal, state, and local level offer a wide range of financial incentives to encourage their cleanup and reuse. When structured correctly, brownfield redevelopment financing can cover a significant portion of both remediation and construction costs, dramatically improving project returns.

The key challenge is assembling a capital stack that accounts for the phased nature of brownfield projects. Remediation must often be completed or substantially underway before traditional permanent financing becomes available, which means borrowers need flexible short-term capital to bridge the gap. Programs like bridge loans and SBA loans can play a critical role in this phase.

How Does the EPA Brownfield Grant Program Work?

The Environmental Protection Agency operates one of the most important public funding sources for brownfield redevelopment. Through the Brownfields Program, the EPA provides grants and technical assistance to communities, states, tribes, and nonprofits to assess, clean up, and sustainably reuse contaminated properties.

There are several key grant types available:

Assessment Grants provide funding for environmental site assessments, including Phase I and Phase II investigations. Community-wide assessment grants can reach up to $500,000 per award, while site-specific grants provide up to $350,000.

Cleanup Grants provide up to $500,000 per site for direct remediation activities. Recipients must contribute a 20% cost share, which can come from private financing or in-kind contributions.

Revolving Loan Fund (RLF) Grants allow communities to establish lending programs that provide below-market loans and subgrants to finance cleanup activities at brownfield sites. These can capitalize funds up to $1 million.

Multipurpose Grants provide up to $800,000 for recipients to conduct both assessment and cleanup activities at one or more brownfield sites.

Under the Bipartisan Infrastructure Law signed in 2021, the EPA received an additional $1.5 billion over five years for brownfield-related activities, representing the largest investment in the program's history. Annual appropriations have increased to approximately $300 million per year through 2026, significantly expanding the availability of these grants.

What Are the Tax Incentives Available for Brownfield Projects?

Tax incentives represent another powerful tool in the brownfield redevelopment financing toolkit. Several federal and state programs can dramatically reduce the effective cost of environmental cleanup and site redevelopment.

Section 198 Expensing Deduction: The federal tax code allows taxpayers to fully deduct qualified environmental remediation expenditures in the year they are incurred, rather than capitalizing them over the life of the property. This deduction applies to expenditures paid or incurred for the abatement or control of hazardous substances at qualified contaminated sites. This provision has been extended multiple times and remains available for qualifying projects.

Opportunity Zones: Many brownfield sites are located within designated Qualified Opportunity Zones, which provide capital gains tax deferral and potential elimination for long-term investments. Combining brownfield incentives with Opportunity Zone benefits can create a highly tax-efficient investment structure.

State Brownfield Tax Credits: More than 25 states offer dedicated brownfield tax credit or incentive programs. These vary widely but can include credits ranging from 25% to 100% of qualified remediation costs. States like New Jersey, Ohio, Pennsylvania, and Michigan have particularly robust programs.

New Markets Tax Credits (NMTC): Many brownfield sites are located in low-income census tracts that qualify for NMTCs, which provide a 39% federal tax credit over seven years on qualified equity investments. This can be layered with other brownfield incentives for maximum impact.

Working with a lender experienced in value-add projects is critical for structuring deals that maximize these incentives while meeting underwriting requirements.

What Financing Options Exist for Each Phase of Brownfield Redevelopment?

Brownfield redevelopment is not a single transaction. It unfolds in distinct phases, each with different capital needs and risk profiles. Understanding which financing tools apply at each stage is essential for maintaining project momentum and controlling costs.

Phase 1: Site Assessment and Due Diligence

Before any remediation begins, you need comprehensive environmental assessments. Phase I Environmental Site Assessments (ESAs) identify potential contamination through records review and site inspection, typically costing $2,000 to $6,000. If contamination is suspected, Phase II ESAs involve soil, groundwater, and air sampling, with costs ranging from $10,000 to $50,000 or more depending on site complexity.

EPA Assessment Grants are the primary public funding source for this phase. Private capital needs are relatively modest, and many investors fund this stage from existing resources or short-term credit facilities.

Phase 2: Environmental Remediation

This is typically the most expensive and unpredictable phase. Remediation costs can range from $50,000 for simple petroleum cleanups to $5 million or more for complex industrial sites with widespread contamination. Common remediation approaches include soil excavation, groundwater treatment, vapor intrusion mitigation, and monitored natural attenuation.

Financing for this phase often combines EPA Cleanup Grants, state brownfield funds, and private bridge financing. Lenders who specialize in transitional properties can structure loans that account for remediation timelines and cost uncertainty.

Phase 3: Site Preparation and Construction

Once remediation is complete or substantially underway with regulatory approval, the property transitions to a more conventional development profile. Horizontal construction loans can fund site preparation, infrastructure, and vertical construction. SBA 504 loans are another excellent option for owner-occupied projects, as detailed in our guide on SBA loans for commercial real estate.

Phase 4: Stabilization and Permanent Financing

After construction is complete and the property is generating income, borrowers can refinance into permanent loan programs with lower rates and longer terms. Lenders will evaluate the property based on its stabilized income, and borrowers can use our DSCR calculator to estimate qualifying parameters.

Ready to explore financing for a brownfield project? Contact our team to discuss your specific site and capital needs.

How Much Does Brownfield Remediation Typically Cost?

Understanding remediation costs is critical for accurate project budgeting and underwriting. Costs vary enormously based on the type and extent of contamination, the remediation method selected, regulatory requirements, and site-specific conditions.

The EPA reports that the average cleanup cost for brownfield sites receiving federal assistance is approximately $250,000, but this figure masks enormous variation. Simple petroleum contamination from underground storage tanks may cost as little as $50,000 to address, while complex sites with mixed contamination involving heavy metals, solvents, and asbestos can exceed $5 million.

Several factors influence total remediation cost:

• Contamination type: Petroleum-based contamination is generally the least expensive to remediate. Chlorinated solvents, heavy metals, and radioactive materials require more complex and costly treatment.
• Extent of contamination: Surface contamination limited to a small area costs far less than deep soil or widespread groundwater plumes that extend off-site.
• Regulatory standard: Cleanup standards vary by state and by intended future use. Residential standards are typically more stringent and costly than commercial or industrial standards.
• Remediation method: In-situ (in-place) treatments are generally less expensive than ex-situ methods that require excavation and off-site disposal.

A thorough Phase II ESA and remediation action plan will provide the cost estimates lenders need to underwrite the project. Using our commercial mortgage calculator can help you model how remediation costs affect overall project economics.

What Role Do State Voluntary Cleanup Programs Play?

State Voluntary Cleanup Programs (VCPs) are among the most important tools available to brownfield developers. These programs, which operate in all 50 states, provide a structured regulatory framework for investigating and cleaning up contaminated sites outside of federal Superfund oversight.

The benefits of enrolling in a VCP include:

• Liability protection: Most VCPs issue a No Further Action (NFA) letter or similar closure document upon successful completion. This provides the property owner with protection against future enforcement actions for known contamination, which is essential for lender comfort.
• Regulatory certainty: VCPs establish clear cleanup standards and milestones, giving lenders and investors confidence in project timelines and costs.
• Risk-based standards: Many VCPs allow cleanup to risk-based standards rather than requiring pristine background levels. This means developers can clean up to commercial or industrial standards when appropriate, significantly reducing costs.
• Lender and buyer confidence: Financial institutions are far more willing to lend on properties enrolled in a VCP because the regulatory pathway and liability protections are clearly defined.

Enrollment in a VCP is often a prerequisite for accessing state brownfield tax credits and incentives. The process typically involves submitting an application, conducting an investigation under state oversight, developing and implementing a remediation plan, and obtaining a closure document.

How Can You Structure a Capital Stack for a Brownfield Project?

The most successful brownfield redevelopment projects layer multiple sources of capital to reduce equity requirements, share risk, and maximize returns. A typical brownfield capital stack might include the following components:

Senior Debt (50% to 65% of total project cost): This comes from traditional commercial lenders, CDFI lenders, or SBA loan programs. The loan-to-value ratio is typically lower than conventional projects due to environmental risk, but improves significantly once remediation is complete and a closure letter is obtained.

Public Grants and Incentives (10% to 25%): EPA grants, state brownfield funds, CDBG funds, and tax increment financing (TIF) can collectively cover a substantial portion of project costs. These sources require application processes with varying timelines, so early planning is essential.

Tax Credit Equity (5% to 15%): New Markets Tax Credits, Historic Tax Credits (for qualifying structures), and state brownfield tax credits can be syndicated to investors to generate project equity. This requires sophisticated legal and financial structuring but can significantly reduce the developer's cash equity requirement.

Developer Equity (15% to 30%): The remaining gap is filled by developer equity. For guidance on typical equity requirements, see our article on commercial loan down payment requirements.

Interested in structuring a brownfield capital stack? Reach out to Clearhouse Lending for a customized financing analysis.

What Are the Biggest Risks in Brownfield Financing and How Do You Mitigate Them?

Brownfield redevelopment carries specific risks beyond those found in conventional commercial real estate projects. Lenders and investors need strategies to identify, quantify, and mitigate these risks.

Cost Overrun Risk: Remediation costs can exceed initial estimates if unexpected contamination is discovered or if the selected treatment method proves less effective than anticipated. Mitigation strategies include thorough Phase II investigations, conservative budgeting with 20% to 30% contingency reserves, and fixed-price remediation contracts where available.

Timeline Risk: Environmental cleanup can take longer than expected due to regulatory delays, weather conditions, or technical challenges. This extends carrying costs and delays revenue generation. Mitigation strategies include building timeline buffers into the project schedule and securing flexible financing with extension options.

Regulatory Risk: Changes in environmental standards or regulatory agency priorities can affect cleanup requirements mid-project. Enrolling in a state VCP helps manage this risk by establishing agreed-upon standards at the outset.

Residual Liability Risk: Even after cleanup, there may be residual contamination or future claims related to historical activities. Environmental insurance products, including Pollution Legal Liability (PLL) policies, can transfer this risk to an insurer. PLL premiums typically range from 2% to 5% of policy limits.

Stigma Risk: Even after successful remediation, some brownfield properties may sell or lease at a discount due to perceived contamination risk. This risk diminishes over time and can be addressed through transparent communication, regulatory closure documents, and third-party environmental monitoring.

What Do Successful Brownfield Projects Look Like?

Understanding how brownfield projects have succeeded in practice helps illustrate the financial potential. Across the country, former industrial sites, gas stations, and manufacturing facilities have been transformed into thriving commercial, residential, and mixed-use properties.

A common pattern involves acquiring a contaminated former industrial property for $500,000 to $1 million below its clean market value, investing $200,000 to $500,000 in remediation (partially offset by grants and tax credits), and creating a finished property worth 2 to 3 times the total investment. The EPA reports that on average, every dollar of EPA brownfield funding leverages $20.13 in additional public and private investment.

Nationally, the EPA Brownfields Program has been responsible for assessing over 40,000 properties, leveraging more than $40 billion in public and private funding, and creating over 190,000 jobs. The program has contributed to making more than 90,000 acres of land ready for productive reuse.

For developers with experience in value-add commercial strategies, brownfield redevelopment represents a natural extension of the skill set, with the added benefit of substantial public support.

Want to discuss a specific brownfield opportunity? Contact Clearhouse Lending today for expert guidance on structuring your project.

Frequently Asked Questions About Brownfield Redevelopment Financing?

What is the minimum investment typically needed for a brownfield redevelopment project?

Small-scale brownfield projects like former gas stations or dry cleaners can be started with total project costs as low as $250,000 to $500,000. Developer equity requirements are typically 15% to 30% of total project cost, so minimum cash equity might range from $40,000 to $150,000 after accounting for grants and incentives.

Can I get an SBA loan for a brownfield redevelopment project?

Yes, both SBA 7(a) and SBA 504 loans can be used for brownfield projects, provided the borrower and property meet standard eligibility requirements. The SBA does require environmental due diligence, and remediation must typically be complete or substantially complete before the loan closes. Our guide on SBA loans for commercial real estate provides additional detail.

How long does brownfield remediation typically take?

Timelines vary dramatically based on contamination type and extent. Simple petroleum cleanups may take 6 to 12 months, while complex sites with groundwater contamination can require 2 to 5 years or more. Monitored natural attenuation, while less expensive, can extend timelines to 10 years or longer.

What environmental insurance products are available for brownfield projects?

Pollution Legal Liability (PLL) insurance is the most common product, covering third-party bodily injury and property damage claims, cleanup cost overruns, and business interruption resulting from environmental conditions. Premiums typically range from 2% to 5% of policy limits for 10-year terms. Cost Cap insurance specifically covers remediation cost overruns above a specified threshold.

Do brownfield tax incentives apply to all property types?

Federal Section 198 expensing applies to qualified contaminated sites regardless of property type, as long as the site meets the definition of a qualified contaminated site under the tax code. State programs vary in their eligibility criteria, with some targeting specific property types or geographic areas. Opportunity Zone benefits require the property to be located within a designated zone.

What happens if additional contamination is discovered during remediation?

Discovering unexpected contamination is one of the primary risks in brownfield redevelopment. The remediation plan and budget will need to be revised, and additional funding sources may be needed. Environmental insurance products, particularly Cost Cap policies, can help manage this risk. Building a 20% to 30% contingency into the original budget also provides a financial buffer.

Can I use bridge financing to fund the remediation phase?

Yes, bridge loans are one of the most common financing tools for the remediation phase of brownfield projects. These short-term loans (typically 12 to 36 months) provide the flexibility needed to complete cleanup activities before transitioning to permanent financing. Lenders who specialize in transitional assets understand the unique risk profile of brownfield projects.

How do I find brownfield properties available for purchase?

The EPA maintains a brownfield property listing through its Assessment, Cleanup, and Redevelopment Exchange System (ACRES) database. State environmental agencies also maintain databases of known contaminated sites. Local economic development agencies often market brownfield properties to attract investment. Commercial real estate brokers who specialize in distressed or special-situation properties are another valuable resource.

Sources

• U.S. Environmental Protection Agency, Brownfields Program Overview and Grant Information, epa.gov/brownfields
• U.S. EPA, "Brownfields Program Accomplishments and Benefits," updated 2025
• Internal Revenue Code Section 198, Expensing of Environmental Remediation Costs
• U.S. Government Accountability Office, Reports on Brownfield Redevelopment Outcomes
• National Brownfields Coalition, Annual Program Assessment
• State Voluntary Cleanup Program directories via ASTM International
• Bipartisan Infrastructure Law, Public Law 117-58, Title V brownfield provisions