Key provisions to expand the low-income housing tax credit (LIHTC) are included in the reconciliation bill passed by the Senate on July 1.
The legislation calls for a permanent 12% LIHTC allocation increase, beginning next year. In addition, it seeks to permanently lower the bond financing threshold test from 50% to 25%, also beginning in 2026.
The provisions are estimated to bring the largest investment to the LIHTC program in decades.
“The housing credit provisions in the Senate reconciliation bill would finance well over a million more affordable homes in the U.S.—a profound impact at a time of staggering need,” says Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition. “We applaud this effort to take an unprecedented step toward resolving a crisis that continues to affect millions of Americans.”
Republicans narrowly passed the Senate bill after vice president J.D. Vance broke a 50-50 tie.
While expansion of the LIHTC program has earned bipartisan support, the larger bill has been strongly criticized because it will cut health care access to millions. The legislation calls for new eligibility requirements for food assistance and Medicaid, raising barriers to key safety-net programs.
The Senate bill heads to the House of Representatives, where its fate is uncertain.
“With our provisions intact, the bill is on fast pace in the House in the next few days,” says Bob Moss, founding partner of MG Housing Strategies. “The House rules committee meets today and could put the bill on the floor as soon as tomorrow. Keep in mind the Senate bill is entirely different than the original House bill, and the speaker will have his hands full ironing out the differences with his members.”
Looking just at the LIHTC provisions, the House bill calls for a 12.5% allocation increase for four years. The House legislation also supports lowering the bond test but for only four years. It also allows state housing credit agencies to provide a basis boost of up to 30% for properties in rural and Native American areas placed in service after Dec. 31, 2025, and before Jan. 1, 2030.
“We are very happy that from an affordable housing perspective the One Big Beautiful Bill (OBBB) is that, as the LIHTC section of the bill will permanently increase 9% allocations by 12% and reduce the bond test to 25%,” says David Gasson, founding partner at MG Housing Strategies. “While the Senate bill did not include the rural basis boost, we are hopeful it might be included by the House, but either way, if signed into law, this will be the most significant investment in affordable housing in decades and one the industry should be proud to have secured.”
Pending passage of the OBBB, advocates have heard from a number of House and Senate members about the possibility of an end-of-year tax package where there may be an opportunity to include more of the affordable housing industry’s agenda, like the basis boosts, according to Gasson.
“For now, we are very thankful for the advocacy by housers from across the country and hope we can celebrate a significant expansion of the LIHTC program in the coming days,” he says.
