The One Big Beautiful Bill, which passed in the House of Representatives last week, has rightfully drawn strong criticism for its cruel provisions that threaten to remove over 10 million people from Medicaid and cut hundreds of billions in nutritional assistance for low-income Americans.^[1] One provision that has not received as much attention, however, is a small statutory change to the Low-Income Housing Tax Credit (LIHTC). LIHTC is the primary federal tool used to build affordable housing in the United States.^[2] Through this program, developers receive tax credits which are sold to institutional investors in exchange for up front equity to build affordable housing projects.^[3] Developers can choose to fund a project with 9% or 4% tax credits. 9% credits generally cover 70% of a project’s total cost, meaning developers need to make up a 30% funding gap.^[4] 4% credit projects, however, only cover 30% of the total cost, meaning developers have to find 70% of the project cost on their own.^[5] These 4% tax credit projects are required to use Private Activity Bonds (PABs), which are loans issued by state governments with low interest rates because interest paid to bondholders is exempt from federal income tax.^[6] Under current law, developers applying for 4% tax credits must finance 50% of their total development costs with PABs.^[7] Attempts to finance half of the development costs can lead to complications as states only have a limited amount of these bonds to allocate which has led to numerous projects being stalled because they could not meet the 50% threshold.^[8] At a time when housing affordability is arguably the most pressing economic crisis facing our country, any attempt to develop affordable units is sorely needed.^[9]

The Affordable Housing Credit Improvement Act (AHCIA) had the same provision in 2023 when it passed in the House, but was shot down in the Senate when it was combined into a larger tax bill.^[10] While this provision might appear opaque, it was estimated that its passage would lead to the development of anywhere between 700 thousand and 1.4 million new units over the next 10 years.^[11] This lofty prediction is based on the assumption that developers will be able to make up the 25% of PAB funding they were previously required to get elsewhere.^[12] The Trump Administration’s skinny budget proposed the elimination of the Community Development Block Grant and the HOME Investment Partnership Program, which provide millions of dollars in gap financing for LIHTC projects every year. Cutting these programs so heavily will reduce options for developers searching for gap financing. Additionally, many states and localities used funds from the American Rescue Plan Act (ARPA), and specifically State and Local Fiscal Recovery Funds (SLFRF) to support affordable housing projects.^[13] Recipients of SLFRF were required to commit the funds to specific contracts or formal agreements by December 31, 2024, meaning none of the funds can be used to subsidize future LIHTC development deals.^[14]

The Big Beautiful Bill is atrocious and takes money from the most vulnerable populations to pay for massive tax breaks for the most well off.^[15] Despite these glaring flaws, there is one provision that could do some good and bridge the gap between demand and supply of affordable housing.^[16] However, lowering the PAB threshold for 4% LIHTC deals is a useless gesture if Congress simultaneously eliminates the main sources developers use to finance their projects.^[17] The administration has also placed a 25% tariff on steel, which will further exacerbate the sharp rise in construction costs and make it even more difficult to finance these projects.^[18] LIHTC is the largest generator of affordable housing in the country, and while many debate its effectiveness, particularly in providing affordable housing for very low-income Americans, the country needs two million affordable housing units.^[19] The programs that the Trump administration wants to cut are a drop in the bucket in the federal budget, and spending money on affordable housing is one of the best investments the government can make, as it reduces reliance on emergency services, reduces crime, improves academic performance, and provides economic stimulus by generating employment.^[20] If Congress is serious about making a meager improvement to LIHTC, they should at least take it seriously enough to make sure that the law they pass will actually work.

*As of July 2025, the Big Beautiful Bill passed the House and Senate and was signed into law on July 4, 2025.

[1] Center for American Progress, The Devastating Harms of House Republicans’ Big Beautiful Bill, by State and Congressional District (Apr. 23, 2024), https://www.americanprogress.org/article/the-devastating-harms-of-house-republicans-big-beautiful-bill-by-state-and-congressional-district/.

[2] Nelson Mullins Riley & Scarborough LLP, One Big Beautiful Bill’s Impact on Affordable Housing, Nelson Mullins Affordable Housing News (Apr. 25, 2024), https://www.nelsonmullins.com/insights/alerts/nelson-mullins-affordable-housing-news/all/one-big-beautiful-bill-s-impact-on-affordable-housing.

[3] Corianne Payton Scally, Amanda Gold & Nicole DuBois, The Low-Income Housing Tax Credit: How It Works and Who It Serves, URBAN INSTITUTE (July 2021), https://www.urban.org/research/publication/low-income-housing-tax-credit-how-it-works-and-who-it-serves.

[4] Id.

[5] Id.

[6] Id.

[7]The Low-Income Housing Tax Credit: Lowering the 50% Bond Threshold to 25%, CONG. RSCH. SERV., IN12070 (Jan. 6, 2023), https://www.congress.gov/crs-product/IN12070.

[8] The Affordable Housing Credit Improvement Act: Detailed Bill Summary, Action Campaign (May 2023), https://rentalhousingaction.org/wp-content/uploads/2023/05/AHCIA-Detailed-Bill-Summary-May-2023-1.pdf.

[9] Bipartisan Policy Center, Opinions on Housing Affordability Poll, Bipartisan Policy Center Blog (Apr. 25, 2024), https://bipartisanpolicy.org/blog/opinions-on-housing-affordability-poll/.

[10] Bipartisan Tax Deal with LIHTC Fails to Advance in Senate, New York Housing Conference (Aug. 2, 2024), https://thenyhc.org/2024/08/02/bipartisan-tax-deal-with-lihtc-fails-to-advance-in-senate/.

[11] Novogradac & Company LLP, LIHTC, PAB Provisions in Newly Reintroduced AHCIA Could Result in Nearly 2 Million Additional Affordable Rental Homes Over 10 Years, Notes from Novogradac (Apr. 30, 2024), https://www.novoco.com/notes-from-novogradac/lihtc-pab-provisions-newly-reintroduced-ahcia-could-result-nearly-2-million-additional-affordable.

[12] Novogradac & Company LLP, House Passes FY 2025 Budget Reconciliation Bill That Includes Biggest LIHTC Expansion in a Quarter Century—Novogradac Estimates 527,700 Additional Affordable Rental Homes Over 2026-2035, Notes from Novogradac (Apr. 24, 2024), https://www.novoco.com/notes-from-novogradac/house-passes-fy-2025-budget-reconciliation-bill-that-includes-biggest-lihtc-expansion-in-a-quarter-century-novogradac-estimates-527700-additional-affordable-rental-homes-over-2026-2035.

[13] National Council of State Housing Agencies, Coronavirus State and Local Fiscal Recovery Funds (SLFRF), https://www.ncsha.org/advocacy-issues/coronavirus-state-and-local-fiscal-recovery-funds/.

[14] Bloomberg Cities Network, Can Reserve Operating Funds for Affordable Housing Be Used Past December 31, 2026?, https://bloombergcities.jhu.edu/faqs/can-reserve-operating-funds-affordable-housing-be-used-past-december-31-2026.

[15] Michael Tomasky, Trump and Republican Budget Plan: Steal from the Poor, Help the Rich, CBO Estimates, New Republic (May 8, 2024), https://newrepublic.com/post/195556/trump-republican-budget-plan-steal-poor-help-rich-cbo-estimate.

[16]The Affordable Housing Credit Improvement Act: Detailed Bill Summary, Action Campaign (May 2023), https://rentalhousingaction.org/wp-content/uploads/2023/05/AHCIA-Detailed-Bill-Summary-May-2023-1.pdf.

[17] Novogradac & Company LLP, FY 2026 Trump Budget Blueprint Proposes $163 Billion in Domestic Nondefense Cuts, Including a $43 Billion Cut for HUD and No CDFI Grant Funding, Notes from Novogradac (May 9, 2024), https://www.novoco.com/notes-from-novogradac/fy-2026-trump-budget-blueprint-proposes-163-billion-in-domestic-nondefense-cuts-including-a-43-billion-cut-for-hud-and-no-cdfi-grant-funding; Tracy Jan, Trump Budget Would Slash Funding for Section 8 Vouchers, Risking More Homelessness, Wash. Post (May 6, 2025), https://www.washingtonpost.com/nation/2025/05/06/section-8-cuts-trump-budget-proposal/.

[18] Sebastian Obando, Construction Materials Costs Rise for Third Consecutive Month Amid Tariff Pressures, Construction Dive (Apr. 30, 2025), https://www.constructiondive.com/news/construction-materials-costs-rise-third-month-tariff-pressures/745225/.

[19] Scally, The Low-Income Housing Tax Credit: How It Works and Who It Serves, Urban Institute (July 2021), https://www.urban.org/research/publication/low-income-housing-tax-credit-how-it-works-and-who-it-serves.

[20] Econsult Corporation, Assessing the Economic Benefits of Public Housing: Final Report (2007), https://clpha.org/sites/default/files/documents/EconsultFinalReport2007_2.pdf; UNC Charlotte Urban Institute, Rethinking the Relationship Between Subsidized Housing and Surrounding Property Values, https://ui.charlotte.edu/story/rethinking-relationship-between-subsidized-housing-and-surrounding-property-values/#:~:text=The%20availability%20of%20geographically%20disbursed%20affordable%20housing%20within%20a%20community,benefits%20of%20a%20subsidized%20housing.