New Housing Bill Boosts Tax Credits by 50% to Spur Housing for Poorest Americans

The Affordable Housing Equity Act of 2025 is taking aim at the toughest end of the housing crisis—housing for extremely low-income households. This bill doesn’t hand out cash directly, but it significantly sweetens the deal for developers who use the Low-Income Housing Tax Credit (LIHTC) program to build rental units for the absolute neediest residents.

The 50% Incentive: Making the Math Work

This legislation focuses on increasing the federal tax credit developers can earn. If a developer sets aside at least 20% of their new rental project for households earning no more than 30% of the area’s median income (AMI)—or 100% of the Federal poverty line, whichever is higher—they get a massive bonus. For those specific units dedicated to the lowest-income tenants, the amount used to calculate the tax credit (the “eligible basis”) jumps by 50%. Essentially, they get a tax break as if those units cost 150% of the actual construction cost.

Why does this matter? Building housing for people who can only afford very low rents is notoriously difficult to finance. This 50% boost is designed to close that financial gap, making projects that serve the extremely poor financially viable where they weren't before. It’s a direct incentive to shift development focus toward the bottom of the income scale, which is where the greatest housing shortages often exist. This applies to projects receiving tax credit allocations after the Act is signed into law, with a slight delay for certain bond-financed projects until after December 31, 2025.

The Local Gatekeeper: Who Decides What’s “Necessary”?

There’s a catch, or perhaps a necessary safeguard: the developer only gets this enhanced credit if the local housing credit agency certifies that the extra boost is “absolutely necessary” for the project to be financially possible. This provision gives local agencies significant power, acting as a gatekeeper to ensure the federal subsidy isn't wasted on projects that would have been built anyway. For the extremely busy reader, this means two things: first, the bill acknowledges that these projects are tough to finance; and second, it relies heavily on local bureaucrats to make a judgment call about financial necessity. The potential challenge here is that the bill doesn't define clear, objective metrics for determining what makes a project “absolutely necessary,” leaving room for interpretation and discretion at the local level.

Real-World Impact on the Ground

For a working parent earning minimum wage, or a senior citizen on a fixed income (the target audience of the “extremely low-income” threshold), this bill could mean the difference between stable housing and chronic instability. By making these projects more profitable for developers, the goal is to increase the supply of truly affordable units. While this is a significant benefit for the lowest-income Americans, it comes at a cost to the federal budget (taxpayers), as the government is essentially forgoing more tax revenue to subsidize these developments. It’s a trade-off: increased housing equity paid for through increased federal tax expenditure. Ultimately, the success of this legislation hinges on local agencies using their new certification power wisely and developers responding to the enhanced financial incentive by actually building the units.