For the affordable housing industry, the biggest news of 2025 took place in July but was years in the making.
President Donald Trump signed a reconciliation bill that included long-sought changes to the low-income housing tax credit (LIHTC) program July 4. The bill provides a permanent 12% housing allocation increase, beginning in 2026. It also reduces the 50% bond financing test to 25%, also beginning in the new year.
The provisions in the One Big Beautiful Bill (OBBB) could finance 1.22 million additional homes over the next decade, according to estimates by the Novogradac accounting and advisory firm.
Affordable housing advocates fought for the changes for years to help alleviate the nation’s housing crisis and bolster the industry.
Other notable events in 2025 included the second Trump administration taking office in January. Since then, the Department of Housing and Urban Development (HUD) has since made a series of controversial moves that prompted multiple housing groups to file lawsuits to block the actions.
Affordable Housing Finance recently asked several members of its editorial advisory board to reflect on the past year.
“The passing of the Big Beautiful Bill was the most significant development for the industry this year,” says Aaron Pechota, executive vice president of development at The NRP Group, a leading affordable and multifamily housing developer and owner. “It marked the most meaningful expansion of the LIHTC program in decades and laid the groundwork for a long-term increase in desperately needed supply. … While this program expansion will not completely resolve the national housing shortage, it represents a significant step forward in addressing the affordable housing deficit.”
Deborah VanAmerongen, strategic policy adviser and leader of the affordable housing team at the Nixon Peabody law firm, points specifically to the impact of lowering the test for tax-exempt bond finance deals.
“The 50% test had been a constraint in the tax-exempt bond/4% LIHTC program, with many states utilizing all of their volume cap,” she says. “This change was needed to open the door to more affordable housing transactions getting done with no increase in overall volume cap.”
Jim Gillespie, executive vice president at BWE, a commercial and multifamily mortgage banking company, also cites the reduction in the bond test as the year’s most significant news.
“While the change in policy unlocked scarce private-activity bond capacity and created the potential to finance more developments nationwide, the transition has not been seamless,” he says. “For decades, the industry operated with a relatively standardized framework built around the 50% test. The move to 25% requires developers, lenders, issuers, and investors to rethink how much taxable debt would be allocated and could be supported and how gaps would be filled. In 2025, much of the industry was still in ‘learning mode,’ testing new capital stack configurations and underwriting assumptions.”
In the near term, the change has introduced complexity and extended timelines as participants work through how to implement the lower threshold.
“In the long run, this policy change has the potential to expand affordable housing production meaningfully,” Gillespie says.
Others overwhelmingly agree that the signing of OBBB is the big story of the year.
“The historical LIHTC fixes and increases the program received in the One Big Beautiful Bill were by far the biggest event of 2025,” says industry leader Bob Moss, co-founder and partner of MG Housing Strategies. “The LIHTC was not even mentioned in the first Ways and Means draft, and finally we inserted some temporary language in the final House proposal that got to the Senate. Once there, we not only got a huge increase and a bond fix, but they were made permanent in the code, not temporary. Kudos to our House and Senate lead sponsors.”
Ronne Thielen, executive vice president and director of public policy and advocacy at R4 Capital, also points to the OBBB changes but shares a broader view.
“Without question, the unprecedented recognition throughout our country from politicians to people on the street of the overwhelming need for more affordable housing throughout the country was the most impactful event of 2025,” she says. “It led to action by Congress to allow our housing credit industry to increase production of affordable rental housing homes by up to 1.22 million; the Federal Housing Finance Agency to double the government-sponsored enterprises’ annual housing credit investments to $2 billion each; the Senate Banking Committee to unanimously advance the bipartisan ROAD to Housing legislation followed by the full Senate passing that legislation and including legislation that would raise the cap on banks’ public welfare exemption investments; and on and on.”
While the expansion of the LIHTC program was by far the biggest news of 2025, there were other notable events for the industry.
Other News
VanAmerongen cites “the uncertainty around federal appropriations and the shutdown of the federal government” as another major story for 2025.
“The president’s budget proposal created a huge amount of uncertainty and distress about whether the federal government would continue to fund HUD programs (particularly rental assistance) at adequate levels,” she says. “While that HUD-related crisis passed since neither the House nor Senate took up his proposals, the funding constraints in the Section 8 voucher program continue to present challenges. The longest shutdown in history threw numerous transactions off of their closing timelines, adding to project costs for developers and their partners.”
State-level deregulation and zoning reform also had a major impact on affordable housing in 2025, according to Pechota.
“States like Texas and Florida are taking meaningful steps to simplify the development process and lower costs,” says the veteran developer. “In Texas, Senate Bill 840 allows multifamily and mixed-use projects by right in areas previously zoned only for office or commercial uses, removing major entitlement hurdles and opening new opportunities for housing. Florida’s 2024 Live Local Act continues to assist in creating more affordable housing development opportunities across the state by reducing zoning restrictions for multifamily housing.”
Together, these reforms represent a shift toward more efficient, supply-oriented housing policy, according to Pechota.
“By addressing zoning constraints and streamlining approvals, states are making it more feasible to deliver affordable units and ensuring that federal resources can be deployed more effectively,” he says.
Thielen also cites concerns about the recent movement toward rent control. “If a local or state agency is focused on just one aspect of the impact of keeping rents low and don’t respect the financial feasibility, both residents and owners will suffer and housing units will be lost to the inventory,” she says.
Pechota notes that constructions costs have leveled off nationally, giving developers greater predictability in budgeting and project planning. “At the same time, housing permits, including those for affordable units, have declined over the past year, indicating a likely slowdown in new supply in the near term,” he says. “Even with stronger policy support, it will take time for the development pipeline to respond and for new units to come to market.”