(Editor’s Note: This story was updated after President Donald Trump signed the legislation.)
The affordable housing industry is poised to see the largest investment in low-income housing tax credits (LIHTCs) in decades after the House of Representatives passed a massive reconciliation bill.
President Donald Trump signed the legislation into law after the House narrowly approved the contentious bill 218 to 214 in early July.
Dubbed the One Big Beautiful Bill (OBBB), the sweeping legislation finally gives affordable housing advocates a long-sought expansion of the LIHTC program. It calls for a permanent 12% credit allocation increase beginning in 2026 and permanently lowering the bond financing threshold test from 50% to 25% for 4% LIHTC developments, also beginning next year.
“The housing credit provisions that just cleared Congress are historic and represent the biggest step forward in addressing our affordable housing crisis in decades,” says Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition. “Everyone in the affordable housing community should be proud of their role in advocating for these proposals that will change the lives of millions.”
Others agree on the importance of bolstering the LIHTC, the nation’s most important program to create affordable housing.
“It is a milestone victory for housing and a testament to the advocacy that many, many people helped with,” says Bob Moss, founding partner of MG Housing Strategies.
The permanence of the LIHTC provisions is significant because it allows housing advocates to move forward on a whole new Affordable Housing Credit Improvement Act with additional improvements for production like bond basis boosts, according to the industry veteran.
“The increase in the 9% allocation will benefit production, but the permanent reduction of the bond test will have a profound effect on housing production and result in the largest expansion of affordable units,” adds David Gasson, founding partner at MG Housing Strategies.
David M. Dworkin, president and CEO of the National Housing Conference, calls the bill’s provisions “the most consequential and positive housing legislation in decades.”
In addition to enhancing the housing tax credit, the OBBB calls for permanent preservation of the existing mortgage interest deduction and reinstatement of the mortgage insurance premium deduction for homeowners.
The bill would also permanently extend the New Markets Tax Credit, with $5 billion in annual allocation authority, and permanently renew the Opportunity Zone program. It also accelerates the phase out of the energy tax credits implemented in the Inflation Reduction Act.
“Housing affordability remains one of the defining issues of our time. Across communities nationwide, longstanding housing challenges demand action by lawmakers—and this year, that opportunity included federal tax policy,” says Greg Brown, senior vice president, government affairs at the National Apartment Association (NAA). “NAA applauds lawmakers in Congress for prioritizing solutions in the reconciliation package that will help boost supply, ease affordability challenges and protect the long-term viability of the nation’s rental housing infrastructure.”
While the bill is a victory for LIHTC supporters, it is expected to have severe consequences for many low-income families by cutting Medicaid, food assistance, and other safety net programs.
“Millions of Americans will lose health insurance coverage resulting from cuts to Medicaid and to Affordable Care Act Marketplace coverage,” says Katie Smith Sloan, president and CEO of LeadingAge, which represents 5,400 nonprofit aging services providers and other mission-driven organizations serving older adults. “Due to the level of deficit this bill will create, Medicare payments to providers may be reduced by 4% for the next 10 years. Band-Aids included in the bill such as only-freezing-but-not-reducing nursing home provider taxes and the creation of a rural health transformation fund—touted as protections for older adults and aging services providers—will soon prove ill-equipped to stop OBBB’s damage. And, as states respond to OBBB-created craters in their budgets due to reduced federal Medicaid contributions, the suffering will begin.”
The National Alliance to End Homelessness also condemns the bill, saying it will result in millions of people losing health coverage and increasing poverty and hunger.
“This legislation will make it harder for people to escape poverty, and it will drive increases in homelessness in communities both red and blue across this nation,” says Ann Oliva, CEO of the Alliance.
Others also acknowledge that aspects of the bill will leave many Americans worse off. The Trump administration has also proposed massive cuts to the Department of Housing and Urban Development in its latest budget request.
“While NHC strongly supports the bill’s significant housing investments, we recognize that other provisions will adversely affect many families across the country,” Dworkin says. “Housing is a continuum, and there is much more work to be done.”
The industry may have to grapple with some residents facing increased hardship due to the changes in the Medicaid program as well as meeting energy reduction requirements with the phasing out of renewable energy programs, adds Gasson.
“We hope parallel efforts we are undertaking to eliminate regulatory barriers to production might mitigate some of these issues,” he says.
“As for what’s next, we still have myriad issues to address like gap financing and the basis boosts that were not included in the bill,” Gasson says. “There is also the issue of demand for the credit and increasing the investor base. We have initiated discussions on this but need direction and buy-in from the industry to focus these efforts.”
