Preheat the oven to 350 degrees with rack in the center of the oven. Butter two 9-inch round cake pans, lightly dust the sides of the pans with flour, tap out excess, and line the bottom with circles of parchment paper
Cook the chili powder in 1 cup of the water in a medium saucepan over medium heat until simmering. Remove the pan from the heat, stir in the vanilla and set aside.
Using an electric stand mixer with a wire whip attachment for the best results, combine the flour, cake flour, sugar, baking soda, salt, and cocoa and beat on low speed until well mixed. Add the softened butter to the dry mixture and beat thoroughly on medium-low speed. The mixture should have a uniform grainy texture.
Increase the speed to medium and gradually add the remaining 1 cup of water and the buttermilk. Add the eggs, one at a time, beating well after each addition. Slowly add the hot water-chili mixture to the batter and continue to beat just until well combined, be sure not to over-beat. Pour the mixture equally into the pans and bake until a toothpick inserted in the center of each layer comes out clean, about 35-40 minutes.
To cool, set the pans on a wire rack for 15 minutes, and then turn the cakes out onto the rack. Remove the parchment paper and immediately invert the cakes so that the risen tops don’t flatten. Let the layers cool completely before frosting.