Affordable Housing Bill Boosts State Funding Formulas and Protects Domestic Abuse Victims in Rental Units

The newly proposed Affordable Housing Credit Improvement Act of 2025 is a massive overhaul of the Low-Income Housing Tax Credit (LIHTC) program, which is the federal government’s main tool for funding affordable rental housing. Essentially, this bill is designed to pump more money into the system, make it easier to build in tough areas, and add crucial protections for tenants.

First, let’s talk money. Title I significantly increases the baseline funding states receive for the credit. For 2025, the per capita allocation jumps to $4.25 (up from the old $1.75), and the minimum amount guaranteed to small states is set at $4.876 million. Crucially, these new figures will be adjusted annually for inflation starting in 2026, meaning the funding pool won’t shrink in real terms over time. This is a big deal because it means states will have significantly more tax credit capacity to finance new construction, which is the only way to tackle housing shortages.

Protecting Tenants from Eviction Fallout

One of the most important, and most human, changes is found in Section 205, which deals with tenant safety. If you live in an affordable housing unit and you or your family member is a victim of domestic violence, dating violence, sexual assault, or stalking, your landlord generally cannot refuse to rent to you or evict you because of the abuser’s actions. This protection is key because it stops victims from being punished—and made homeless—due to crimes committed against them by someone else. The bill also clarifies that if an abuser is removed from a unit, the victim who stays behind doesn't trigger a tax credit compliance issue, ensuring the victim can keep their home.

Making Housing Work in Tough Markets

For developers and communities, the bill makes it easier to build in high-cost or underserved areas. Title IV and V grant special status to Native American areas and designated rural areas, automatically including them as “Difficult Development Areas” (DDAs) where projects receive a higher subsidy. This recognizes that building housing in these places often costs more or is harder to finance. Furthermore, Section 307 offers a major incentive: if a project sets aside at least 20% of its units for extremely low-income households (those earning 30% or less of the area median income), the tax credit basis for those units gets a 50% boost. This is designed to make it financially viable to serve the people who need housing assistance the most.

Cracking Down on Speculation and Local Vetoes

Not all changes are about giving out more money; some are about tightening up the rules. Section 302 limits how much a buyer can claim as the acquisition cost (basis) for a building acquired less than 10 years after it was put into service. This is aimed squarely at investors who try to buy recently constructed affordable housing, flip it at an inflated price, and claim a huge tax credit based on that inflated value. Now, the acquisition basis is capped at the lowest price paid in the last 10 years, adjusted for inflation. This should discourage pure speculation.

Another significant shift is in Section 306, which restricts the role of local politics in the allocation process. States can no longer give extra points or weight to a project just because local elected officials support it, nor can they penalize a project based on local opposition. This means that while local input remains important, political veto power over affordable housing projects is significantly curtailed in the state's Qualified Allocation Plan (QAP).

The Fine Print: Less Bond Financing and More Scrutiny

While the bill is largely a boost, there are two provisions that could complicate financing. Section 313 cuts the amount of tax-exempt bond financing that can be used alongside the tax credit from 50% down to 25% for new bond issues after 2025. This move could increase the reliance on the tax credit itself and make some larger bond-financed projects harder to pull off. Separately, Section 312 adds a new requirement that the IRS must review and determine the “reasonableness of the development costs” for projects receiving credits after 2025. While this is intended to increase accountability, the term “reasonableness” is subjective, and without clear federal guidelines, this could lead to inconsistent scrutiny and delays for developers trying to get projects approved.