The One Big Beautiful Bill Act’s Impact on Affordable Housing
The One Big Beautiful Bill Act (“OBBBA”) which was signed into law by President Trump on July 4, 2025, has significant impacts for affordable housing.
One of the most notable changes brought about by the OBBBA is the permanent 12% increase in the 9% allocations for low-income housing tax credits (LIHTC) beginning on January 1, 2026. Every state receives a LIHTC allocation based on its population. Currently the per capita multiplier is $3.00 (or a small state minimum allocation of $3,455,000). The OBBBA increases the multiplier by 12% making it approximately $3.36 per capita which significantly increases the amount of low-income housing tax credits available to be awarded in competitive funding rounds annually.
The OBBBA also includes a major change to tax-exempt bond financed developments. Currently if the development is expected to be financed with at least half (50%) tax-exempt bonds and all units will be qualified low-income, then the development may qualify for and receive a 4% LIHTC allocation without competing in the state’s LIHTC funding round. The “50% Test” is performed, which looks to ensure that 50% or more of the tax-exempt bond proceeds have been used to finance the aggregate basis of the building and the land on which the building is situated. If the development does not pass the 50% Test, then the 4% LIHTCs received would be equal to the percentage of the development financed with the tax-exempt bonds, rather than 100%, which would leave the development with a large funding gap. The OBBBA lowers the threshold for tax-exempt bond financing from 50% to 25% starting in 2026. This stretches the bond financing further which allows for additional affordable units.
The OBBBA also includes other changes that affect the development of affordable housing. One such way is bonus depreciation being permanently fixed at 100% for qualifying assets that are placed in service after January 19, 2025. This is an increase from 40% bonus depreciation currently allowed which was phasing out over the coming years and can positively impact investor returns. The OBBBA phases out several energy-efficiency credits including the 45L and 25D credits. The 45L New Energy Efficient Home Credit will be repealed on June 30, 2026, and the 25D Solar Tax Credit will be repealed on December 31, 2025.
McKonly & Asbury, LLP is a leader in accounting for affordable housing developments. IRS and state housing finance regulations require specialized knowledge when preparing audits and taxes for affordable housing entities. Our team has the specialized knowledge to help ensure you comply with IRS and state housing finance agency reporting requirements. For more information on these services and more, be sure to visit our Affordable Housing page, and don’t hesitate to contact us.
The information presented in this post is intended solely for informational purposes and should not be construed as accounting advice from McKonly & Asbury, LLP.
About the Author
Elizabeth is a Partner with McKonly & Asbury as well as the Director of our firm’s Affordable Housing Services. She has over twenty years of extensive audit, tax, and consulting experience in the affordable housing industry. Elizabe… Read more
