Bill would raise housing tax credits and lengthen affordability rules

State housing agencies would raise the amounts used to calculate credits for designated projects and reserve at least one-third of annual credits for those project types. Covered projects pay prevailing wages, use renewable energy, sit near transit, include qualifying accessible units, or house enough extremely low-income families. A state housing agency must find that the increase is needed to make the qualifying feature financially workable in a low-income housing project. The wage category requires local prevailing rates for covered workers; the income category requires at least 20% of units to house families earning no more than 30% of area median income. The transit category covers specified distances from rail or bus service and certain walkable areas. The accessible formula uses qualifying low-income accessible units as a share of all units, subtracts five percentage points, and caps the increase at 50 points by itself and the overall cap stated below applies as well as part of all listed increases together not exceeding 250 percent of the starting amount. The calculation increases would apply to buildings placed in service after enactment; the state reservation would apply to calendar years beginning after enactment.

State housing credit ceiling formulas would use $9.79 per resident and $11.34 million as their two dollar amounts. The amounts would apply to each state’s annual low-income housing credit ceiling. Inflation adjustments would use calendar year 2026 as their base. The amounts would apply to calendar years beginning after December 31, 2026, and inflation adjustments would begin after 2027.

Low-income housing affordability agreements would require restrictions for 35 years after the compliance period instead of 15 years after that period. The provision covers buildings governed by federal low-income housing tax-credit extended-use agreements. The 35-year period would apply to agreements entered into in tax years beginning after enactment.

Owners would retain the qualified-contract route only for buildings that meet specified pre-2027 dates. The qualified-contract route is a process through which an owner asks the housing agency to find a buyer under program rules. A credit-funded building must have received its credit allocation before January 1, 2027. A covered bond-financed building must have received a required eligibility or financial-feasibility determination before January 1, 2027. For covered existing projects, fair market value would include both low-income and other portions of the building and account for continuing rent restrictions. Most provisions would take effect upon enactment; the fair-market-value rule would apply to written requests submitted after enactment.

A temporary tax-exempt bond financing threshold would be 15% for qualifying bonds issued before 2028. The threshold covers low-income housing buildings financed with the specified tax-exempt bonds. The 15% figure applies only to qualifying tax-exempt bonds issued before January 1, 2028. The threshold would apply to buildings placed in service in tax years beginning after December 31, 2025, with a special placement-date rule for rehabilitation work.