06 Oct 2025 Improving the Low-Income Housing Tax Credit (LIHTC) in Housing
Since 1986, the Low-Income Housing Tax Credit (LIHTC) has facilitated the construction and preservation of approximately 4 million affordable rental homes by encouraging private investment. The One Big Beautiful Bill Act enhanced LIHTC, increasing 9% credit allocations by 12% and lowering the threshold for private-activity bond financing from 50% to 25%, starting in 2026. While these provisions are the most significant changes to LIHTC in decades, there are still several steps Congress can take to make LIHTC more efficient and ensure longer-term affordability.
BPC Action’s two-pager offers a menu of legislative reforms to improve LIHTC’s efficiency, including measures to:
- Exempt LIHTC-financed projects from NEPA review, which could expedite the construction of affordable housing while reducing development costs.
- Exempt LIHTC-financed developments from Davis-Bacon prevailing wage requirements, which could generate significant savings, lower the effective cost of construction and rehabilitation, and allow more projects to pencil out.
- Extend the LIHTC affordability period and expand access to PABs for affordable housing projects, which would preserve existing affordable homes, ensure long-term affordability, and enable the development of additional affordable homes by easing the pressure on state PAB allocations.
- Direct the Treasury Department to collect data on the drivers of hard costs (including labor and materials) and soft costs (including syndication and legal fees) for LIHTC projects, which would inform future efforts to curb runaway costs and make LIHTC more efficient, maximizing the number of affordable units produced per dollar of LIHTC allocation.
Explore why these measures are needed and how they would address the shortage of affordable housing.
