This bill aims to improve the Low-Income Housing Tax Credit program by updating state allocation formulas, reforming tenant eligibility requirements, modifying credit eligibility and determination rules, and providing targeted assistance to Native American and rural communities.
Todd Young
Senator
IN
**Affordable Housing Credit Improvement Act of 2025 Summary:** This bill aims to expand and improve the Low-Income Housing Tax Credit (LIHTC) program by updating state allocation formulas, reforming tenant eligibility requirements, and modifying credit eligibility rules. It also focuses on increasing affordable housing opportunities for Native Americans and in rural areas. Additionally, the bill updates terminology in the Internal Revenue Code to replace "low-income" with "affordable" when referring to housing tax credits, and promotes data sharing and discourages discriminatory land use policies to enhance transparency and effectiveness.
Affordable Housing Act 2025: More Credits, New Tenant Rules, and a Push for Smarter Development
The Affordable Housing Credit Improvement Act of 2025 is a major overhaul of the federal program that helps fund affordable housing. It's looking to pump more money into the system by increasing state tax credit allocations starting in 2025, significantly changes who qualifies for these homes, and updates the rules for how these housing projects get built and financed. The main goal is to expand and improve the nation's affordable housing stock by making the tax credit program more effective and accessible.
More Cash in the System: Boosting State Housing Credits
Starting in 2025, states will see a significant bump in the amount of housing tax credits they can allocate. As outlined in SEC. 101, the per capita amount for calculating these credits jumps to $4.25 in 2025. Then, in 2026, this figure gets another 25% boost on top of a cost-of-living adjustment. The minimum amount states receive also increases, hitting nearly $4.9 million in 2025 and getting a similar 25% plus inflation increase in 2026. What this means for your community is that state housing agencies will have more financial firepower to support the construction and rehab of affordable apartments. Think more resources to get more projects off the ground.
Who Gets to Live There? Big Shifts in Tenant Eligibility
This Act brings several important changes to who qualifies for affordable housing and their rights:
- Income Stability: Good news if your income goes up a bit after moving in. SEC. 202 codifies rules so that if you initially qualified with an income at or below 60% of the Area Median Income (AMI – a standard measure of household income in a region), you generally won't be forced to move if your earnings increase, as long as the unit remains rent-restricted. For some tenants who qualified with incomes between 60% and 80% of AMI, this protection is also clarified.
- Student Housing: The rules for students are getting an update under SEC. 203 (effective for tax years after Dec 31, 2025). While units occupied solely by full-time students under 24 generally don't count, this bill carves out important exceptions. A student can now qualify if they meet income limits and are married, a person with disabilities, a veteran, have a qualifying child, are a victim of domestic violence or human trafficking, were an emancipated minor, in legal guardianship, formerly in state care, or experienced youth homelessness. This could open doors for more students facing housing insecurity.
- Voucher Clarity: If you use a housing voucher, SEC. 204 clarifies that your voucher payment counts as part of your rent for certain project qualification purposes (effective for rent paid after Dec 31, 2025). This helps ensure projects serving voucher holders can meet the program's financial requirements.
- Protections for Domestic Abuse Victims: This is a critical safety enhancement. SEC. 205 prohibits landlords in these properties from refusing to rent or evicting someone based on criminal activity related to domestic violence, dating violence, sexual assault, or stalking if they are the victim or threatened victim. It also ensures that if an abuser is evicted from a unit, the remaining occupants (like a victim and their children) aren't treated as new tenants, which could otherwise destabilize their housing. These protections generally apply to agreements made or changed 30 days after the Act's enactment.
- Veterans' Preference: SEC. 206 formally clarifies that housing projects can give occupancy preference to veterans, treating them as a specified group under a Federal program, making it easier to develop dedicated veteran housing.
Building Blocks: Revamping Credit Rules and Project Development
The Act introduces a host of changes to how affordable housing projects are developed and how credits are used:
- Disaster Recovery: If a natural disaster damages a building, SEC. 301 gives owners more time—up to 25 months, potentially extendable by another 12 if the disaster was widespread—to reconstruct or replace the property without losing tax credits. This offers crucial breathing room for communities hit by events like hurricanes or wildfires, applying to casualties from 25 months before the Act's enactment.
- Relocating Tenants During Rehab: For projects undergoing substantial rehabilitation, SEC. 303 allows costs associated with temporarily relocating existing tenants (like paying for their temporary housing or moving services) to be included as