The Big Federal Bill Passed…Now What?
What housers need to know, including and beyond LIHTC
The Bill Which Shall Not Be Named has passed—and with it, the largest transfer of wealth from struggling families to the ultra-rich in recent memory. The bill slashes Medicaid, guts the Affordable Care Act, claws back funding commitments made under the Biden Administration, tears apart so many aspects of the energy transition, and much, much more. It’s dizzying and devastating, and this is before we get to the housing part.
But understanding what this means for housing means going beyond housing. This is the most important lesson we housers can take from what has happened. As Shelterforce’s Miriam Axel-Lute made clear recently, no amount of LIHTC expansion can make up for what was just done to our safety net, and to the Americans and housing providers who rely on it. What’s more, the Big Bill isn’t the full extent of the bad news—the FY2026 budget will likely include devastating cuts to rental assistance (make sure to scroll to our overview of the budget proposal, we include lots of links to organizations who are helping us make sense of what’s to come).
Let’s start with LIHTC.
Whether you’re a LIHTC1 fan or not, it’s ultimately one of the main financing mechanisms for affordable housing that we have that actually, which feels crazy to say in today’s time, enjoys bipartisan support. Affordable housing and LIHTC advocates have been pushing for an expansion of the program for a long time now, even so recently as to have introduced the Affordable Housing Credit Improvement Act of 2025 in early April of 2025, which includes, to no one’s surprise, some of the exact provisions and language that’s included in the reconciliation bill. The two major provisions that carried over into the Big Bill are:
A permanent increase in 9% LIHTC allocations to 12%.
Lowers the 50% “financed by” threshold to 25% for private activity bonds (PABs) to enable more bond deals.
While 9% Low-Income Housing Tax Credit (LIHTC) allocations are more desirable than 4% credits, they are awarded competitively by state housing finance agencies due to their higher value. Increasing the annual allocation cap to 12% would provide states with more credits to support affordable housing developments. In contrast, 4% LIHTC allocations—though less generous—are easier to obtain because developers automatically qualify if at least 50% of project costs (including land and building) are financed with Private Activity Bonds (PABs). Under the new legislation, that threshold is lowered to 25%, making it easier for developers to access the credit and likely increasing its uptake. One estimate from Novogradac suggests that these changes could together finance an additional 1.22 million rental homes. Unfortunately, the final Senate bill did not include the rural and tribal basis boosts that were part of the earlier House version.
But, these new policy changes do not exist in a vacuum, and there are concomitant changes happening that may dampen the projected effects of these changes. Research from institutions like Novogradac, and the Urban Institute highlight the potential effect of a lower corporate tax rate on the value of LIHTC investments. Because the LIHTC program relies heavily on equity investments from corporations, a reduced tax liability lessens their incentive to purchase tax credits. Analyses conducted in 2018—following the Tax Cuts and Jobs Act of 2017, which lowered the corporate tax rate from 35% to 21%—warned of this exact outcome. Now, nearly seven years later, updated research is needed to assess the full impact of the lower corporate tax rate on LIHTC equity markets and affordable housing development.
It’s the housing-adjacent provisions that do the real damage.
Unobligated funds from the Green and Resilient Retrofit Program (GRRP) will be rescinded, though most of the program's funding remains intact and will continue to flow.
The bill claws back unobligated funds from GRRP, a $1 billion preservation program created by the Inflation Reduction Act to upgrade HUD-assisted multifamily housing for energy efficiency, disaster resilience, and healthy living. Between August 2022 and November 2024, HUD awarded funding to 250 properties across 42 states, D.C., and Puerto Rico. But only about 20 of those projects managed to close before the Administration froze the program in early 2025, leaving the status of hundreds of awarded projects in limbo. A federal judge later filed a preliminary injunction ordering the administration to reinstate funding awarded under the IRA and IIJA. Reports now suggest that funds are now flowing again.
Ethan Handelman, former Deputy Assistant Secretary for Multifamily at HUD (who joined us on the show in April) shared that the only GRRP funds rescinded were a comparatively small set of unobligated funds designated for contractors. These funds were intended to support due diligence for the Comprehensive Cohort, which was designed to help property owners apply without needing consultants or in-house technical staff. Without that support, some properties may not be able to close, while others will struggle unnecessarily. In contrast, properties in the Leading Edge and Elements cohorts—which, by design, already had transaction plans and scopes of work decided and therefore don’t need contractor help—remain insulated from the bill’s impact and can close as long as obligated funds are processed.
In short. Most GRRP funding will flow and many projects will still happen. But the clawback, though small, will introduce unnecessary burdens for some property owners—potentially preventing some projects from closing and undercutting the reach of a critical program.
The limit on the federal tax deduction for state and local taxes (otherwise known as SALT) will be raised to $40,400.
Basically, the SALT deduction is for taxpayers who itemize their deductions to reduce their federally taxable income (a mechanism for taxpayers in high tax states and high-income filers to avoid double taxation). Prior to the bill, taxpayers could only deduct up to $10,000 of property, sales or income taxes that they’ve already paid to state and local governments. Now, that limit has been raised by 4X to $40,000. It’s regressive tax policy, and will cost us revenue.
Here’s an analysis from the Tax Foundation modeling who the more generous SALT deduction cap would benefit. Surprise, surprise, it’s primarily high earners.
A 50% funding cap for the Consumer Financial Protection Bureau.
Decreases the maximum amount the CFPB can request from the Federal Reserve to cover operating expenses from 12% to 6.5%, reducing the agency’s spending on administrative capacities. With less administration capacity, the CFPB, established in 2011 as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the major legislative response to the 2008 financial crisis and great recession, will be even less able to carry out its functions as a federal regulator.
In February of 2025, the Trump Administration ordered the CFPB to stop nearly all its work, including proposed rules, suspend effective dates on any rules that were finalized but not yet effective and stop all investigative work. This is a legislative nail in the coffin.
Medicaid & SNAP
Estimates suggest that upwards of 16 million American adults and children will risk losing their health insurance over the next decade. The Center for Budget and Policy Priorities has conducted a thorough state-by-state analysis of the proposed changes to Medicaid. In California alone, enrollment is projected to drop by 2.4 million by FY2034.
SNAP isn’t spared either. The program faces deep funding cuts, stricter eligibility rules, and reduced benefit levels. Millions will lose access entirely—and those who remain eligible will receive less.
How is this happening? Massive cuts to funding, work requirements, and a shift in cost (both funding and capacity) burdens onto states.
We have a new post and podcast episode coming soon that dives into what these changes really mean for the housing and homelessness sectors. Beyond the devastating fact that many of the people we’re trying to support through better housing policy are also those who rely on Medicaid and SNAP, there’s another loss at stake: innovation.
Under the Biden-Harris Administration, Section 1115 Demonstrations gave states flexibility to test new approaches using Medicaid dollars—like CalAIM in California, which integrated housing and health supports. But this bill prohibits using Section 1115 waivers to get around the new work requirements. Worse still, it allows states to use 1115 waivers to implement those requirements early—just as some states, like Arkansas, tried to do after the first Trump Administration encouraged them to adopt work mandates.
Where does that leave programs like CalAIM? We’ll talk about that more in the next few weeks.
And some progress
Permanent renewal and enhancement of opportunity zones and new market tax credits.
Opportunity Zones and New Market Tax Credits (NMTC)2 are both tax incentives meant to spur private sector investment in low-income and undercapitalized communities. While the details of each differ (government-approved entities select investments with the NMTC and private investors choose projects with OZs), they’re worth lumping together since they represent two major place-based tax policies for economic and place-based development/investment. Another rare moment of the infusion (rather than slashing) of funds in the Big Bill, it makes the opportunity zones incentive, a signature part of the Tax Cuts and Jobs Act of 2017 which was set to expire at the end of 2026, permanent. The final bill also makes the NMTC permanent at $5 billion in annual allocation authority.
Here’s a Brookings Institution analysis of the changes made to OZ under the bill.
A 10-year moratorium on state AI regulation enforcement was struck down.
Luckily, this provision failed almost unanimously, with a 99-1 Senate vote to cut the provision. What’s the connection to housing you ask? Companies like RealPage use algorithmic pricing to help landlords set prices for apartments. It was something the Biden-Harris Administration paid attention to, the Federal Trade Commission and Department of Justice filing a joint legal brief explaining how and why it violates antitrust law, and the Justice Department suing Real Page for the algorithmic pricing scheme. Increasingly, cities like San Francisco, Philadelphia, Berkeley and Minneapolis have banned algorithmic rental price-fixing software. States are taking similar efforts, although to a less successful degree. Bills have been introduced in Arizona, California, Idaho, Illinois, Georgia, New Hampshire, Hawaii and more. It’s even made it to the Senate floor.
The FY2026 Budget Request: More Cuts to Essential Funding
On May 30, the Administration released its full discretionary budget request for FY2026. This largely flew under the radar with all the very public debates, fights, and advocacy around the Bill. The President’s budget request (which essentially outlines the Administration’s policy and funding priorities for the next fiscal year) kicks off the formal budget process. Appropriators are currently working to reach topline funding agreements for the 12 appropriation bills, while House and Senate Appropriations Committees are moving forward with drafting their FY2026 spending bills.
But beyond the specifics of topline funding agreements and final markups, the message is abundantly clear. More cuts to essential funding. While vouchers remained unscathed following the passage of the reconciliation bill, it will certainly not in FY26 negotiations. There are serious threats to Continuums of Care, both on funding and structural support. States will be put in a perilous position by assuming more responsibility for housing and homelessness services (by the passthrough of dollars and responsibility to state governments), and there being less money to go around for the people who need these critical services. The list of proposed changes are long and they are devastating. I’ll spare the details, both because it is hard to stomach and because a lot of other organizations have crunched the numbers and done a more complete analysis of what this budget proposal means for housing. A quick summary and links to additional resources below:
The Bipartisan Policy Center provides a quick overview of the changes to federal housing programs.
The National Alliance to End Homelessness goes in depth into what the federal budget proposal means for homelessness services.
The President’s FY2026 Budget Proposal: Potential Impacts on Efforts to Prevent and End Homelessness
The Center for Public Enterprise has done an analysis on the impact of potential federal rental assistance cuts on supply.
Here’s the FY 2026 Budget Request, and the FY 2026 Congressional Justifications from HUD for those who care to read more in depth.
And also coming down the pipeline, the future of Fannie Mae and Freddie Mac. Politico does some good coverage of how recent statements by the Administration have “baffled” housing experts.
And Some Small Glimmers of Hope in a Dark Time
The National Housing Crisis Task Force released a State and Local Housing Action Plan. There are people doing this work, and a lot of that is going to happen at the local and state level. The arc of history is long, and soon we will have the capacity and power to do something, and we sure as hell better be ready.
NPR did some beautiful coverage on green social housing Vienna style, but with Chicago flavor. Chicago just passed Mayor Johnson’s Green Social Housing Ordinance, which basically authorizes the creation of a new nonprofit, The Residential Investment Corporation (RIC), which will own and operate permanently affordable, mixed-income housing through a large revolving fund. Social housing is not just a wishful pinning of the American left, we’re seeing cities and nonprofits and advocates across the country start to socialize this idea. It’s also exciting to see that we can build a bigger political tent, one that draws the clear link between our affordable housing and climate crises.
What’s to Come
Across every provision, the message is clear: wealth will flow upward, federal responsibility will shrink, and the social safety net will fray. We’re committed here to covering what’s happening in Washington, what that means for team housing and team people that believe in the necessity of a social safety net. Despite all the despair, we have to hold room for hope and possibility. We’re committed here to keep the drum beating on what is working, things that we believe can work once we have our chance. Stay tuned for more podcasts on our national crisis, and on the ideas, plans, organizations, companies, developments and people who give us hope for the future.
For a great and quick LIHTC explainer, see Shelterforce’s work
For a NMTC explainer, see this Congress.gov explainer.