House-Passed Reconciliation Bill Provides Largest Housing Credit Expansion in Quarter Century

This morning, the House passed the 2025 reconciliation legislation, titled the “One Big Beautiful Bill Act,” by a 215 – 214 vote, sending the bill to the Senate, which will consider it after it returns from the Memorial Day recess. The bill represents the largest increase in Housing Credit resources since Congress raised the caps on Housing Credits and Private Activity Bonds and indexed the caps for inflation 25 years ago. The bill would:

• Increase the Housing Credit volume cap for 9 percent properties by 12.5 percent for four years: calendar years 2026, 2027, 2028, and 2029;
• Lower the bond financing threshold to 25 percent for 4 percent Housing Credit properties placed in service after December 31, 2025, so long as the bonds financing the project have an issue date between December 31, 2025, and January 1, 2030; and
• Allow state Housing Credit agencies to provide a basis boost of up to 30 percent for properties located in rural and Native American areas placed in service after December 31, 2025, and before January 1, 2030.

The congressional Joint Committee on Taxation estimates that these changes would cost $14.1 billion. According to Novogradac, the investment will increase the supply of affordable rental housing nationwide by 527,000 additional homes, result in the creation of 790,000 jobs, and generate $89.1 billion in wages and tax income and $30.8 billion in federal, state, and local tax revenues. Novogradac will soon publish in its blog state-by-state impact estimates.

NCSHA and our partners in the ACTION Campaign have long sought to boost affordable rental housing supply by increasing Housing Credit resources. The Housing Credit provisions in the reconciliation bill originate with the Affordable Housing Credit Improvement Act, the standalone comprehensive Housing Credit legislation to expand and strengthen the program, which is a top NCSHA priority.

The bill would not make changes to eliminate or limit the tax exemption for private activity bonds (PAB), as some had feared early in the bill’s consideration. NCSHA has strongly advocated for the PAB tax exemption to be maintained.

The bill reforms and expands the Opportunity Zones (OZ) tax incentive, including modifying the definition of low-income communities eligible for OZ status, requiring more rural areas to be included as OZs, and providing more generous benefits in rural OZs. The first round of OZ designations stemming from initial enactment of the tax incentive in 2017 would end on December 31, 2026, and governors would need to designate new areas under the modified requirements, which would benefit from the designation beginning January 1, 2027, and lasting through December 31, 2033.

Several of the clean energy tax credits repealed or phased out more quickly are relevant for the housing industry. Specifically, the bill repeals the Energy Efficient Home Improvement Credit, Residential Clean Energy Credit, and New Energy Efficient Home Credit. It would also accelerate the phase out of the Clean Electricity Investment Credit. Other offsets relevant to housing include a reduction in funding for the Consumer Financial Protection Bureau from up to 12 percent to 5 percent of Federal Reserve operating expenses and rescission of unobligated Green and Resilient Retrofit Program funding.

More information on the tax provisions in the bill can be found here.

President Trump actively worked with House leadership to secure enough votes to pass the bill, after various factions had pressed for changes. In the end, blue state Republicans were able to secure an increase in the cap on state and local tax deductions and conservatives succeeded in accelerating the effective date for Medicaid work requirements that were included in previous iterations of the bill.

The bill also would raise the debt ceiling by $4 trillion.

The bill now heads to the Senate, where it could see additional changes before it is finalized. The Senate process will require extensive involvement with the Senate parliamentarian, as Democrats are likely to challenge all aspects of the bill that could run afoul of Senate parliamentary procedures for reconciliation bills. Some Senators are also likely to object to some of the deep cuts to Medicaid and other social safety net programs, while others will press for even deeper cuts. Republican leaders in Congress want to have the bill to President Trump for his signature by July 4. NCSHA will remain vigilant in our advocacy for the Housing Credit pieces and in our opposition to any modifications to the tax exemption for PABs.