House Passes Reconciliation Bill with Permanent Housing Credit Volume Cap Increase, 25 Percent Bond Financing Threshold

The House this afternoon passed the budget reconciliation bill, the same version the Senate passed earlier this week. President Trump plans to sign the bill into law tomorrow. The vote for the bill was 218 – 214, with all Republicans but Brian Fitzpatrick (PA) and Thomas Massie (KY) supporting it and all Democrats opposed.

The bill includes a permanent 12 percent increase in 9 percent Housing Credit authority beginning in calendar year 2026 and permanently lowers the bond financing threshold from 50 to 25 percent for 4 percent Credit projects financed with tax-exempt private activity bonds that have an issue date after December 31, 2025. According to the Joint Committee on Taxation, these provisions represent an estimated $15.7 billion in tax expenditure.

The bill also includes permanent 100 percent bonus depreciation for qualified properties, which should benefit Housing Credit investors and thereby help boost pricing. The bill does not include the basis boost increases for Housing Credit properties in rural and Native American areas included in the House version. The bill makes no changes to the tax exemption for private activity bonds.

The Housing Credit provisions in the bill represent the most substantial expansion of federal affordable housing resources in 25 years. They will enable state housing credit agencies and their partners to finance up to an additional 1.22 million affordable homes than otherwise would have been possible over the next decade, according to an analysis by Novogradac.

The final bill also permanently extends and reforms the Opportunity Zone tax incentive and also permanently extends the New Markets Tax Credit program, currently set to expire at the end of 2025. It also accelerates the phase-out and termination of clean energy tax credits implemented in the Inflation Reduction Act but more slowly than the phase-out schedule in the original House bill.

It also raises the debt limit by $5 trillion.