WASHINGTON, D.C. — The One Big, Beautiful Bill Act (OBBBA), signed into law on July 4, contains provisions to incentive affordable housing investment and development, namely expansions of the 4 and 9 percent Low-Income Housing Tax Credit (LIHTC) programs and Opportunity Zone (OZ) codes.
The bill provides a permanent 12 percent increase in the allocation of 9 percent LIHTC. Previously, each state received a limited amount of these credits to award each year to affordable housing projects. The law has increased that amount by 12 percent, which raises the chances developers will be awarded the credits.
The percentage refers to the rate developers receive as a subsidy, which is typically about 9 percent of a project’s eligible construction costs for 10 years. Developers often sell the credits to banks or investors to fund development.
The law also permanently reduces the private activity bond financing requirement of 4 percent LIHTC credits from 50 to 25 percent. To qualify for 4 percent tax credits, a developer must also use tax-exempt bonds to finance at least 50 percent of a project’s cost. The bill halves that requirement, which makes more housing projects eligible for 4 percent tax credits and frees up states’ bonds for other uses.
With the new act, tax codes now also permanently authorize Opportunity Zones, originally set to expire by about 2028, with new, 10-year designations made by governors beginning in 2026 and every 10 years going forward. OZs are federally designated areas where investors receive tax breaks for building housing and other commercial property types. States can now identify new OZs every 10 years.
With these incentives, Novogradac estimates that 1.22 million additional affordable rental homes could be financed between 2026 and 2035.
Click here for the National Association of Affordable Housing Lenders’ OBBBA fact sheet.