America faces a severe shortage of affordable housing, with millions of people struggling to find a safe, stable place to call home. This crisis demands urgent action—and Congress has taken an important first step.
On July 4, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a sweeping legislative package that includes significant new investments in the low-income housing tax credit (LIHTC), the nation’s most important affordable rental housing production program. Since its creation in 1986, the LIHTC has helped finance the construction and preservation of approximately 4 million affordable rental homes by encouraging private investment. This strong track record has earned the program rare bipartisan support.
The OBBBA permanently increases 9% credit allocations by 12% and lowers the threshold for private-activity bond financing from 50% to 25%, starting in 2026. Together, these changes are expected to produce more than 1.2 million additional affordable rental homes at a time when they are needed most.
However, these improvements are not enough. Without reforms to make the housing tax credit more efficient and ensure longer-term affordability, the program risks falling short of its potential.
As longtime members of the housing industry and affordable housing community, we see a clear path to make the LIHTC program work even better. In our fiscally strained times, we owe it to taxpayers to maximize the number of affordable homes built per federal dollar and ensure those homes remain affordable for longer. Achieving these goals requires action on four fronts:
- Reduce program fragmentation. State flexibility in implementing LIHTC is valuable, but today’s patchwork of building regulations and qualified allocation plans slows construction and raises costs.
Building codes offer a chance to address the kind of variation in local rules that can hamper LIHTC’s efficiency. While comprehensive reform may ultimately require congressional action, Treasury can play a meaningful role by providing guidance on a national common base building standard (like the International Building Code) to ensure a uniform level of quality while accelerating development timelines, making the process more predictable for investors and developers.
2. Streamline regulations. Affordable housing projects—often those financed through a mix of LIHTC and other federal sources—can face a maze of regulations, from the National Environmental Policy Act to the prevailing wage requirements of the Davis-Bacon Act. While well-intended, these regulations add inefficiencies that drive up development costs, extend development timelines, and otherwise limit the LIHTC’s impact. To meet the moment, the administration and Congress should take a deregulatory approach by exempting LIHTC developments from burdensome federal requirements without compromising quality or essential worker protections.
3. Increase participation in the LIHTC market. Financing a LIHTC development is complicated under the best of circumstances, making it difficult to attract private investors beyond large banks and corporations. The Federal Housing Finance Agency recently took a critical step by doubling the amount that Fannie Mae and Freddie Mac may invest in the LIHTC market to $2 billion each, as well as channeling capital toward underserved and rural LIHTC developments. Congress can build on this momentum by making it easier for smaller investors to participate in the market by expanding investor eligibility and simplifying credit transfers. Treasury can help by opening a secondary exchange for buying and selling credits. And we can increase the value of the LIHTC by synchronizing the periods for compliance and usage to 10 years.
4. Keep LIHTC units affordable for longer. By 2029, nearly 500,000 LIHTC units will exit their federally mandated 30-year extended affordability period, leaving many units vulnerable to conversion to market-rate properties and further reducing the affordable housing supply. Congress must act to extend affordability periods through legislation like the Keep Housing Affordable Act, which incentivizes longer affordability commitments in exchange for expanded access to private-activity bonds for rehabilitation.
The OBBBA’s enhancements to the LIHTC are a step in the right direction. Now, Congress and the administration must build on this momentum. By reducing the program’s administrative fragmentation, easing regulatory burdens, expanding investor participation, and ensuring long-term affordability, we can enhance the power of LIHTC as a vital funding source for affordable rental housing.