LISC: Supporting Housing and Community Development Investments in a 2025 Tax Bill

Congress has recently turned its attention to drafting an ambitious tax package, with a focus on extending provisions from the 2017 Tax Cuts and Jobs Act that will expire later this year. LISC’s Matt Josephs examines how this legislation can be a vehicle to enact policy proposals to increase the supply of housing, create homeownership opportunities, and advance economic recovery in under-resourced communities.  

4.17.2025 - LISC Stories

Last week, the House and Senate approved budget resolutions on party line votes that will pave the way to overhaul the tax code and extend or make permanent trillions of dollars of tax cuts enacted in 2017 that are set to expire this year. As in 2017, Republicans will attempt to pass this legislation without Democratic support through a process called reconciliation. With razor thin majorities in the House and Senate, it is too early to say whether Republican efforts will be successful or whether they will need to ultimately need Democratic support to enact a tax package. Regardless of the path taken to get there, one thing is certain: Congress must take this opportunity to address our national housing supply shortage, and to support under-resourced communities.

Rental Housing

We are in the midst of a housing affordability crisis. According to Harvard’s Joint Center for Housing Studies, 22 million families—half of all renter households—are cost burdened, paying more than 30 percent of their income in rent; with one-quarter of all households paying at least 50 percent of their income towards rent. And yet at a time when more affordable housing production is needed, we are underproducing, with the Joint Center report noting that multifamily construction starts have fallen from an annualized rate of 531,000 units in the first half of 2023 to just 343,000 units in the first quarter of 2024.

Bipartisan legislation to expand the availability of affordable apartments was introduced in the House last week. Representatives Darin LaHood (R-IL) and Suzan DelBene (D-WA) re-introduced the Affordable Housing Credit Improvement Act (AHCIA) which would fuel the development of over 1.6 million additional units of rental housing units over the next 10 years, all generally affordable to families earning 60 percent or less of the area median income in their communities.

The bill aims to expand the number of housing units by increasing the amount of tax credits that can be awarded to developers, and by reducing the amount of private activity bonds that must be utilized in order to secure tax credit financing. In the previous Congress, the legislation garnered 273 co-sponsors, in part because it draws on what lawmakers know already works. The Housing Credit has successfully financed close to four million affordable housing units since its inception, helping to house over 9.2 million low-income families. This measure will help seed new developments, rehabilitate existing properties to keep them affordable for lower income families, and support financial stability for millions.

This measure will help seed new developments, rehabilitate existing properties, and support financial stability for millions.

Homeownership

Modelled after the Low Income Housing Tax Credit, the Neighborhood Homes Investment Act (Neighborhood Homes) would create an incentive for investors to finance new and rehabbed single-family homes in rural and urban communities where the cost to build generally outpaces the price at which homes could be sold. The latest iteration of the legislation, introduced last week by Representatives Mike Kelly (R-PA) and John Larson (D-CT), would fuel the development and rehabilitation of more than 500,000 homes over the next 10 years, while supporting 861,000 new jobs in the construction industry. In addition, the availability of additional housing for their employees will help to attract business to under-resourced communities.

Beyond the numbers, Neighborhood Homes responds to a basic fact: there is simply not enough single-family housing being built to meet the needs of American families. The National Association of Realtors estimates that there is a national shortage of over seven million single-family homes. This drives up housing costs for all Americans but particularly hurts moderate-income families and first-time homebuyers that are increasingly priced out of the market. And in many communities, aging and abandoned houses can’t be repaired or resold because there isn’t the financing available to do so. Neighborhood Homes attracts the private capital needed to build these homes, which is one reason why it had more than 100 bipartisan co-sponsors in the House last year.

Economic Recovery

LISC is also hoping to see action on one of the most critical economic development tools to have emerged in the past 25 years—the New Markets Tax Credit (NMTC). Through 2023, NMTC investments totaling $73 billion have supported over $135 billion in total project financing for 8,500 business and real estate projects in some of the nation’s most distressed communities.

The NMTC program is set to expire this year, but Representatives Claudia Tenney (R-NY) and Terri Sewell (D-AL) reintroduced the New Markets Extension Act in February to make the program permanent. The bill would provide $5 billion in an annual allocation authority, indexed for inflation, and would exempt NMTC investments from the alternative minimum tax. Companion legislation was introduced in the Senate by Senators Steve Daines (R-MT) and Mark Warner (D-VA).

This program is a priority for LISC because it is such a powerful tool for community revitalization. It helps supports business and jobs—from health centers to manufacturing facilities to charter schools to retail developments. And it also helps advance affordable housing by financing mixed-use developments that include affordable rental units as well as bringing capital to single-family development efforts.

Collectively, these housing and community development policies directly impact the quality of life for millions of Americans across the country.

As with housing-specific programs, leverage is one key to NMTC’s long track record of success. The credits attract $8 in private capital for every federal dollar spent, and the program generates more federal revenue than it costs in outlays. It brings down the cost of capital for high-impact projects, serves as gap financing so developments are financially viable, and encourages the flow of capital to communities facing economic challenges.

We are also eager to work with Congress to seek improvements to the Opportunity Zones program, which is set to expire next year. Enacted as part of the 2017 Tax Cuts and Jobs Act, it is a different vehicle than the NMTC program, with a more limited geographic scope and an incentive structure that tends to attract investors seeking higher returns than are possible through the Housing Credits or NMTCs. One of the more surprising outcomes of Opportunity Zones is that much of the investments have been targeted to support housing, with hundreds of thousands of multifamily housing units coming online through the initiative. However, it is estimated that less than 4 percent of these units are rent-restricted affordable housing, raising a real concern that low-income families may be displaced from communities that are poised for economic recovery. Any extension to Opportunity Zones must also include provisions that support increased development of affordable housing in these communities.

What’s Next

The Republicans will soon begin marking up its legislation, with ambitious deadlines to produce a tax bill by the end of May. While it is likely that Opportunity Zones will be a part of this package, the fate of LIHTC, NMTCs and particularly Neighborhood Homes—which represents new tax policy and not an extension or improvement of current tax policy—is much less certain.

Nonetheless, there is a clear path for each of these initiatives to be included in the tax legislation, as each has significant Republican support. The housing crisis, once a coastal issue, is now hitting all parts of the country. Both parties have consistently talked about the need to develop more housing, and the AHCIA and NHIA would collectively support over 2 million more units of affordable homes over the next decade. Similarly, the NMTC Program enjoys widespread support from Republicans who appreciate the value of engaging the private sector to invest in all too often forgotten rural and urban communities, and the catalytic impact of these investments.

Collectively, these housing and community development policies directly impact the quality of life for millions of Americans across the country. They can help shore up economic resilience for families and communities alike, supporting long-term growth and driving economic prosperity that would not otherwise be possible. LISC will continue to make this case in the coming weeks and months, so that these families and communities will not be left behind in future tax legislation.