The FWD #238 • 999 words

The “Big Beautiful Bill” may be a game changer for affordable housing. But we’re far from locking up a win.

President Trump’s “One Big Beautiful Bill Act”, signed into law on July 4, incorporates many conservative priorities sought by Congress during the reconciliation process. So, it’s quite remarkable the bill also includes the most significant expansion of federal affordable housing incentives in over two decades.

At a time when nearly half of American renters spend more than 30% of their income on housing costs, and homeownership seems increasingly out of reach for many, this legislation could reshape the affordable housing landscape—but with important trade-offs.

Major Housing Provisions

The centerpiece of the housing provisions is a dramatic expansion of the Low-Income Housing Tax Credit (LIHTC) program. Beginning in 2026, the bill permanently increases 9% LIHTC allocations by 12%, which translates directly into more funded projects since virtually all states are oversubscribed. This change is projected to finance approximately 80,000 additional affordable rental units over the next decade.

Even more impactful could be the reform to Private Activity Bond requirements. The legislation permanently reduces the threshold for bond financing from 50% to just 25% of land and building costs for properties placed in service after December 31, 2025. This technical tweak could finance more than ten times as many new units than the credit expansion can on its own.

According to analysis by Novogradac, the combined reforms have the potential to generate an additional 1.22 million affordable rental homes across the United States between 2026 and 2035. This represents the largest expansion of the LIHTC program in over 25 years, and stands to create unprecedented opportunities for addressing the affordable housing shortage.

Energy Efficiency Credits Power Down

While expanding housing incentives, the bill simultaneously rolls back energy efficiency programs that many developers had integrated into their financing strategies. Solar and wind renewable energy tax credits are eliminated for projects not beginning construction before July 4, 2026, and the Section 45L new energy efficient home credit ends for properties acquired after June 30, 2026. This shift forces developers to scramble for gap funding, with some projects facing potential losses of $500 to $5,000 per unit—potentially $1 million for a typical 200-unit building.

Opportunity Zones Get a Makeover

The legislation permanently reauthorizes Opportunity Zones with significant reforms. New 10-year designations will be made by governors beginning in 2026, with eligibility criteria modified to focus on communities with median household incomes not exceeding 70% of metro area medians or poverty rates of 20%. The reforms include special provisions for rural areas, including a new rural Qualified Opportunity Fund requirement and reduced substantial improvement thresholds.

While detailed project data remains scarce, most retrospective analyses of first round investments have the same conclusion: OZ incentives generally benefitted developments that would have occurred regardless. Time will tell whether “Opportunity Zones 2.0” will create any meaningful impacts for the communities they aim to improve.

Noteworthy—But Less Big—Changes

The bill extends the New Markets Tax Credit program permanently with $5 billion in annual allocation authority. Having generated over $143 billion in total investment and created more than 1.2 million jobs over two decades, this extension provides crucial certainty for community development projects.

The legislation also includes provisions that could benefit landlord technology companies, with language that would potentially block states from regulating AI-powered rent-setting algorithms—a detail that advocates will continue to watch closely. 

Fleeting Relief, Growing Unease

Despite concerns about the bill’s energy credit rollbacks, affordable housing advocates are celebrating what Enterprise Community Partners calls “meaningful wins” for the industry. The permanent extensions provide greater long-term certainty that developers and investors desperately need for project planning.

But the general mood among housers is far from celebratory. The coming months will determine the fate of crucial federal housing and homelessness programs as Congress attempts to pass a budget. Earlier this year, the Trump administration kicked things off with a budget proposal that slashed rental assistance, zeroed out CDBG and HOME, and drastically reduced most other avenues of federal housing investments.

While appropriations committees in both the House and Senate have thus far rejected most of these massive cuts, the story is far from over. Even if housing programs escape with level appropriations for FY 2026, we’re still left treading water at best. Without more robust funding to alleviate homelessness and high housing costs in the near-term, each new dollar invested into an expanded LIHTC program will have less of an impact in the long-term.

The Bigger Picture

While these housing provisions represent significant progress, they’re just a small portion of a massive bill that the Congressional Budget Office projects will add $2.4 trillion to the national debt over the next decade. Some economists warn that this growing debt mountain could translate into higher interest rates for all Americans, potentially offsetting some benefits of increased affordable housing development.

For developers, the new landscape means more complex but potentially more lucrative financing strategies. Capital stacks will become much more varied, requiring deeper understanding of state-specific bond programs and geographic variations in financing availability.

Looking Forward

The “One Big Beautiful Bill” certainly delivers on promises to expand affordable housing opportunities, while simultaneously reshaping the energy efficiency landscape. For an industry accustomed to working within tight constraints, these changes offer both tremendous opportunities and new challenges.

As developers, investors, and housing advocates digest these sweeping changes, one thing is clear: the affordable housing sector is about to enter a new era. Whether this era will successfully address America’s housing challenges remains to be seen. If efforts to dismantle critical housing supports find purchase, we may end up squandering the most significant expansion of affordable housing development in a generation.