The Affordable Housing Credit Improvement Act of 2025 updates state housing credit calculations, reforms tenant eligibility, and enhances credit eligibility to increase affordable housing options for low-income communities, Native American areas, and rural regions.
Darin LaHood
Representative
IL-16
The Affordable Housing Credit Improvement Act of 2025 aims to increase affordable housing options by updating state housing credit formulas, refining tenant eligibility rules, and improving credit eligibility and determination. This includes adjusting income verification processes, modifying student occupancy rules, and protecting domestic abuse victims. The bill also focuses on Native American and rural assistance by addressing housing needs in Indian areas and streamlining income eligibility for rural projects. Additionally, it revises rules for exempt facility bonds and renames the "low-income housing tax credit" to the "affordable housing tax credit" while encouraging data sharing and discouraging discriminatory land use policies.
Affordable Housing Credit Revamp Proposed: Bill Boosts Funding, Updates Tenant & Developer Rules Starting 2025
This legislation, the Affordable Housing Credit Improvement Act of 2025, sets out to significantly overhaul the federal program supporting affordable rental housing development, even renaming the Low-Income Housing Tax Credit (LIHTC) to the 'Affordable Housing Tax Credit' (Sec. 701). It aims to increase the supply of affordable units by boosting the amount of tax credits available to states (Sec. 101) and tweaking numerous rules affecting tenants, developers, and specific communities.
More Resources, New Rules for Renters
The bill increases the amount of tax credits states can allocate starting in 2025, calculated using higher per-capita and minimum amounts that will adjust for inflation annually (Sec. 101). For tenants, several rules are changing. The bill formally adopts an 'average income test' option, allowing projects to serve households with varying income levels as long as the average meets affordability targets (Sec. 201). It clarifies rules for when tenants whose incomes rise after moving in can still occupy a credit-supported unit (Sec. 202) and refines rules for student occupants, generally restricting units occupied solely by full-time students under 24, but carving out exceptions for specific groups like veterans, students with disabilities, parents, victims of domestic violence or trafficking, and formerly homeless or foster youth (Sec. 203). Importantly, the bill adds protections mirroring the Violence Against Women Act, preventing landlords from denying housing or evicting tenants based on their status as victims of domestic violence, dating violence, sexual assault, or stalking (Sec. 205). It also clarifies that housing preferences for veterans don't violate the general public use requirement (Sec. 206).
Shifting the Landscape for Developers
Developers face updated guidelines. The bill lowers the threshold for projects financed with tax-exempt bonds to qualify for credits automatically, dropping the requirement from 50% bond-financing to 25% (Sec. 313). This could make it easier for more projects to access credits. For projects serving extremely low-income households (at or below 30% of area median income or the federal poverty line), the bill offers a significant 50% boost in the eligible basis used to calculate credits, potentially making these deeper-affordability projects more feasible (Sec. 307). Rules around acquiring existing buildings are tweaked (Sec. 302), and relocation costs for tenants during rehabilitation can now count towards qualifying expenditures (Sec. 303). After a natural disaster, developers get a longer, clearer timeframe (up to 25 months, potentially extendable) to rebuild or replace damaged property without losing credits (Sec. 301). State agencies gain more authority in evaluating projects, specifically in determining if a project fits into a 'community revitalization plan' (Sec. 305), but are prohibited from prioritizing projects based on local political support or local government contributions (Sec. 306). Oversight on development cost reasonableness is also mandated (Sec. 312).
Focusing on Underserved Areas
The legislation introduces specific measures aimed at boosting affordable housing in underserved communities. It designates qualifying 'Indian areas' (Sec. 402) and certain 'rural areas' (Sec. 501) as 'difficult development areas,' potentially making projects there eligible for enhanced credits. State allocation plans must now consider the housing needs of tribal members and entities (Sec. 401). The population cap limiting the designation of 'qualified census tracts' (which can also receive enhanced credits) is removed entirely (Sec. 304), and the cap for 'difficult development areas' is raised from 20% to 30% of a state's population (Sec. 311), potentially expanding the geographic availability of these credit enhancements.
Transparency and Technical Tweaks
Beyond the major changes, the bill includes technical adjustments, like clarifying rules for refinancing tax-exempt bonds used for housing (Sec. 601) and ensuring energy efficiency deductions don't negatively impact a housing project's credit eligibility (Sec. 309). It also expresses a 'Sense of Congress' encouraging better data sharing for program transparency and discouraging discriminatory land use policies that hinder affordability (Sec. 801), though these are non-binding statements.