By the end of the decade, nearly 400,000 affordable homes across America are on track to lose income restrictions. When we’re already facing a shortage of 7.1 million homes affordable to renters with extremely low incomes, the loss of existing housing stock could be catastrophic.
The good news: In my three decades in housing, I’ve never heard as much discussion as now on potential solutions to our housing affordability challenges. And, that discussion spans political persuasion while happening at all levels of government.
Recent federal policy wins set the stage for greater preservation. The One Big Beautiful Bill Act (OBBA) delivered a historic expansion of the low-income housing tax credit (LIHTC) that could produce and preserve 1.22 million additional affordable homes, driving down costs for families nationwide. OBBA also made Opportunity Zones (OZs) a permanent part of the tax code, with new rural investment incentives, including a 30% basis step-up for long-term rural investment. This change could channel private capital to preservation projects in communities often overlooked by traditional investors. Lowering the substantial improvement test also makes it possible to use for preservation.
Days before the August recess, Republican Sen. Tim Scott of South Carolina joined forces with Democratic Banking Committee counterpart Sen. Elizabeth Warren of Massachusetts to advance a broad package of housing reforms, including many provisions that would protect families from losing their homes.
This momentum underscores a rare alignment across the political spectrum: The preservation of affordable housing is both urgent and good policy.
To address our growing challenge, I propose three main pillars of action:
- Maximize Use of Expanded LIHTC for Preservation
- Leverage the higher annual 9% credit allocation and lower 4% bond-financing threshold to refinance and rehabilitate at-risk LIHTC, Section 8, Section 515, and other properties;
- Target rural and preservation deals in state qualified allocation plans (QAPs), especially in rural and high-opportunity areas, including reforms to qualified contracts and right of first refusal; and
- Encourage cross-program financing, combining LIHTC with HOME, Housing Trust Fund, U.S. Department of Agriculture Rural Development programs, and the new OZ incentives.
- Target OZ Capital for Preservation in Rural and Disinvested Communities
- Use the rural OZ basis boost and substantial improvement threshold changes to make preservation financially viable in low-income rural markets;
- Promote OZ investments in LIHTC properties, with advocacy for additional incentives (such as safe harbors and higher gain exclusions for affordable housing); and
- Align Community Development Financial Institution (CDFI) and Community Development Entity strategies to direct OZ capital toward mission-driven preservation deals.
- Streamline Local Barriers and Modernize Building Systems
- Advance state and local reforms to speed approvals for preservation projects, reduce zoning barriers, and exempt preservation rehab from certain costly requirements;
- Deploy innovative retrofit technologies—like Hydronic Shell’s exterior modular HVAC systems—that enable in-place modernization without resident displacement; and
- Address rising insurance and operating costs through pooled risk programs and energy-efficiency and resilience upgrades that stabilize long-term affordability.
Developers, investors, state agencies, CDFIs, and community partners must align around a preservation-first strategy that taps into the expanded LIHTC, permanent OZs, and other federal resources to keep existing affordable homes in the communities that need them most.
When it comes to our affordable housing shortage, we must preserve the homes we have by leveraging these new resources – and seize the opportunity to transform lives.
Shaun Donovan is CEO of Enterprise Community Partners. He served as secretary of the Department of Housing and Urban Development and White House budget director under President Obama.