NCSHA Washington Report | May 9, 2025

State and local officials were blindsided in 2016 when the House of Representatives passed a tax bill that would have eliminated their ability to finance affordable housing and essential infrastructure with a type of tax-exempt municipal debt misleadingly named “private activity bonds.” They rallied to convince the Senate to remove the provision from the final bill that became the basis for the 2017 Trump tax cuts.

None of us around for that near-death experience ever want to repeat it, so a large, energetic coalition of municipal bond issuers, advocates, and allies — the Public Finance Network — has been working for months to avoid a similar outcome in the House’s efforts now to extend those cuts and add new ones President Trump wants.

As a result, key Republicans have stepped up at a critical time to argue for the necessity of tax-exempt financing for state and local governments.

Representative Don Bacon (R-NE) organized a letter signed by two dozen of his colleagues to Ways and Means Committee Chairman Jason Smith (R-MO), who will shepherd the tax bill, that warned tampering with the tax exemption would “increase taxes and reduce services for residents, and cause the delay or cancellation of projects, impacting public safety and impeding economic growth.”

House Financial Services Committee Chairman French Hill (R-AR) and six of his subcommittee chairs also wrote Smith to “caution against any measures that could have unintended consequences on the municipal bond market for thousands of local governments and the constituents they serve.” They added:

Tax-exempt municipal bonds have a proven track record of responsible, community-driven investment. They are a fiscally sound tool that enables state and local governments to meet the growing needs of their communities without increasing federal spending or burdening local taxpayers.

For many, it’s their first home, at a lower mortgage rate and with down payment assistance made possible by state housing finance agency programs, like StartSmart from the Arkansas Development Finance Authority. For many others, it’s an affordable apartment like the hundreds of mixed-income apartments transforming North Omaha funded by the Nebraska Investment Finance Authority. State HFA tax-exempt housing bonds reduce homeownership costs for nearly 80,000 households a year and finance more than 40 percent of affordable apartment construction nationwide.

A large majority of states actually need more bond-issuing authority to meet their affordable homeownership and rental housing needs than federal law authorizes. Those needs may grow if Congress accepts the huge cuts to federal housing assistance the White House has proposed.

Tax-exempt finance is the lifeblood of most of America’s infrastructure and much of its affordable housing. Any move by Congress to limit it would be disastrous.

Stockton Williams | Executive Director

In This Issue

• Ways and Means to Mark Up Tax Bill on Tuesday
• Bipartisan Group of Senators Introduces Bill to Facilitate GSE Housing Credit Investment
• NCSHA Signs Letter Urging Reestablishment of VA Partial Claim Program
• Senate Banking Committee Approves Hughes, Woll Nominations
• Neighborhood Homes Investment Act Introduced in Senate
• Looking Ahead

Ways and Means to Mark Up Tax Bill on Tuesday
The House Ways and Means Committee is scheduled to mark up the tax portion of the 2025 reconciliation bill Tuesday after many months of preparations, meetings, and tax team discussions. While text will not be available until sometime over the weekend, indications are the net cost of the tax cuts they are considering is approximately $4 trillion, which will need to cover extensions of Tax Cuts and Jobs Act provisions, President Trump’s other tax priorities, and any other tax changes that could be included in the bill. The budget resolution Congress passed last month allows up to $4.5 trillion but only if authorizing committees find at least $2 trillion in spending cuts; otherwise, the amount available for tax cuts goes down proportionately. Disagreements on how to meet spending targets are continuing, thus, limiting the size of the tax package.

NCSHA and its advocacy partners are continuing to press for inclusion of Housing Credit resources in the bill. Should the House version not include our priorities, we will be working with our champions in the Senate to achieve them, particularly as the budget resolution provided more wiggle room for additional tax provisions in its instructions to the Senate Finance Committee than in its instructions to the House Ways and Means Committee.

Bipartisan Group of Senators Introduces Bill to Facilitate GSE Housing Credit Investment
Senators Jerry Moran (R-KS), Mark Warner (D-VA), Todd Young (R-IN), and Peter Welch (D-VT) reintroduced legislation Thursday to amend the Internal Revenue Code to clarify that Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac are not ”tax-exempt controlled entities” (TECEs) and thus may invest in multi-investor Housing Credit funds without negatively impacting the tax benefits available to all investors in those funds. The clarification the bill seeks would increase the efficiency of Housing Credit investment in smaller, rural areas, which Fannie and Freddie’s statutory Duty to Serve obligations require them to serve.

NCSHA has been pressing the Treasury Department to clarify the underlying issue. NCSHA will continue advocating with the Treasury and also strongly supports the legislation.

NCSHA Signs Letter Urging Reestablishment of VA Partial Claim Program
NCSHA joined other affordable housing and veterans organizations in sending a letter Wednesday to the Secretary of Veterans Affairs (VA) requesting the VA to reestablish a temporary partial claim program in response to the cancellation of the Veterans Affairs Servicing Purchase Program, announced in April. The letter requests that the Veterans Assistance Partial Claim Program be deployed through December 31, 2025, to assist the estimated 75,000 veterans who are seriously delinquent on their loans through the VA Home Loan Guaranty Program and are at risk of foreclosure.

Senate Banking Committee Approves Hughes, Woll Nominations
The Senate Banking Committee voted Tuesday to report favorably the nominations of Andrew Hughes to become Deputy Secretary of the U.S. Department of Housing and Urban Development (HUD) and David Woll to be HUD’s General Counsel. Both passed via party-line votes, with all Republicans voting in support and all Democrats opposed. Committee Chair Tim Scott (R-SC) praised both nominees’ experience and expertise. Ranking Member Elizabeth Warren (D-MA) said she opposes both nominations because Hughes and Woll would not commit to her to oppose President Trump’s efforts to cut HUD programs.

The committee also approved by party-line vote the nomination of Michelle Bowman to serve as Vice Chair for Supervision at the Federal Reserve. All the nominations now go to the full Senate for consideration, but the timing of Senate action on them is uncertain.

Neighborhood Homes Investment Act Introduced in Senate
Senators Todd Young (R-IN) and Mark Warner (D-VA) yesterday introduced the Senate version of the Neighborhood Homes Investment Act. The legislation, one of NCSHA’s top priorities, seeks to increase the supply of affordable for-sale housing through a new tax credit. It is identical to the version introduced in the House several weeks ago by Representatives Mike Kelly (R-PA) and John Larson (D-CT). NCSHA summarized the bill in more detail in our blog. In addition to Young and Warner, the bill is cosponsored by Senators Tim Scott (R-SC), Cindy Hyde-Smith (R-MS), Kevin Cramer (R-ND), Ron Wyden (D-OR), Chris Coons (D-DE), and Tim Kaine (D-VA).

Looking Ahead

Legislative and Regulatory Activities

• May 12 | Comments Due | OMB Request for Information: Deregulation
• May 14 | U.S. House Housing and Insurance Subcommittee Hearing on Expanding Choice and Increasing Supply: Housing Innovation in America

NCSHA, State HFA, and Industry Events

• May 12 – 15 | NALHFA Annual Conference | Minneapolis, MN
  Robert Henson will speak at this event.
• May 13 – 14 | Building Michigan Communities Conference | Lansing, MI
  Jennifer Schwartz will speak at this event.
• May 15 | American Institute of Servicing and Legal Executives Institute Meeting | Washington, DC
  Garth Rieman will speak at this event.
• May 22 | Early-Bird Registration Ends | NCSHA’s Housing Credit Connect & Marketplace | Chicago
• June 24 – 27 | NCSHA’s Housing Credit Connect & Marketplace | Chicago