Before the Break: Housing Funding, LIHTC Demand, and Reform in Motion
As we approach the end of July, we wanted to provide you with an update on the current status in DC, as Congress prepares to head home (and elsewhere) for the month of August. Yes, we are still glowing in the aftermath of our LIHTC success in the OB3 (One Big Beautiful Bill), but we have not rested, as there is much work to be done both on the tax and appropriations side for housing.
While we are thrilled with the $15.7 billion boost we received in LIHTC resources, we have also been focused on demand, as decreases in pricing will not boost our case in Washington for more assistance. We have been in conversations with tax staff and Members of the tax writing committees, including our AHCIA lead sponsors, on ways to increase the demand for the LIHTC. It is widely believed that the phasing out of 45L credits will alleviate some of the competition for the LIHTC, but we remind you that what one Congress does can be undone by a future Congress. Also, we need significantly more investment than might result from investors in energy credits turning to the LIHTC. We will talk more about potential avenues to increase investment later, but conversations are underway, so if you have ideas, please share them with us.
There has also been a lot of angst regarding the WSJ article outlining the administration’s desire to significantly cut rental assistance. This is not new, as that skinny budget the administration released back in May denoted their desire to slash HUD funding, including existing contracts. That said, Congress is not playing along. The House THUD budget-maintained funding or PBRA and TBVs, although they did zero out the HOME and Choice Neighborhood programs. We do not expect the Senate to follow suit based on conversations we have had with Senate appropriators. It should also be noted that they need 60 votes in the Senate for appropriations, so even if Republicans wanted to slash funding, which they do not, it is not likely their Democratic colleagues would go along with this. We expect to see the Senate THUD budget in the coming days, so stay tuned.
In the end, it is not likely Congress will agree on a final FY2026 budget, as was the case with FY2025. We will have a continuing resolution in late September, hopefully avoiding a shutdown, and with the vast difference in funding levels between the White House/OMB, House, and Senate, it is likely a year-long CR is in the cards. We would then hope, as was the case in FY2025, that anomalies would be included, maintaining the needed level of funding or rental assistance.
On a more positive note, as he mentioned at the June HAG/AHTCC meeting, Congressman Mike Flood (R-NE) is working on a HOME bill that would create greater efficiencies within the program, leading to fewer regulatory barriers and more housing. His bill would address Davis Bacon issues (raising the unit cap before triggering Davis Bacon), Build America, Buy America (exempting HOME from the requirements), and lessen or eliminate NEPA reviews for HOME, to name a few. We have included the draft outline of this bill and invite you to share any thoughts or ideas you might have as we work with Congressman Flood and his staff on the bill.
We also wanted to bring to your attention another bill introduced by Congressman Flood and Congresswoman Brittany Peterson (D-CO). The Identifying Regulatory Barriers to Housing Supply Act would incentivize localities to eliminate barriers to housing development by leveraging their CDBG funding. Among the areas they would like to address are A. expanding by-right multifamily zoning, B. allowing multifamily units (2,3 & 4 unit dwellings) in areas zoned for single-family, C. allowing manufactured homes in areas zoned for single-family, & D. reducing minimum lot size. A companion bill was introduced in the Senate by Senators Todd Young (R-IN) and Brian Schatz (D-HI).
We hope you are and will continue to enjoy your summer, and, as events warrant, we will keep you apprised of anything that occurs between now and when Congress returns in September.
Thank you.