On July 1, 2025, in a 51-50 vote, the Senate approved its tax reconciliation bill which includes key provisions to expand the low-income housing tax credit (LIHTC). If enacted, these provisions would amount to the largest investment in the LIHTC in decades, and would finance over 1.2 million more affordable homes over the next decade than otherwise possible, according to Novogradac, a national professional services organization specializing in real estate, affordable housing, community development and renewable energy.
The Senate’s bill includes the following modifications to the LIHTC:
- A permanent 12% allocation increase starting in 2026 for the 9% LIHTC.
- The 50% bond financing threshold test would be permanently reduced to 25% beginning in 2026, lowering a barrier to affordable housing production and allowing states to make more efficient use of their bond cap resources.
Overall, this legislation would allow states to maximize production of housing projects built using private activity bonds. The legislation will now be sent back to the House of Representatives for final consideration, which is expected to begin on Wednesday, July 2. The House and Senate may need to reconcile their differences before approving a final version of the bill. If this is achieved, then the legislation will be sent to President Trump. The President is seeking for passage and signing of the bill before Friday, July 4.
Summer associate Ashanti Nelson contributed to this report.
