Susan Gittelman
Bipartisanship is currently a rare bird in Washington but pending federal housing legislation presents a unique opportunity. The Housing for the 21st Century Act passed the House by a 390-9 vote in February. The Senate’s 21st Century ROAD to Housing Act passed 89-10 in March.
There are at least two reasons why the House and Senate shouldn’t squander this opportunity for bipartisan cooperation. One is that the most important pieces are included in the versions both bodies have approved. The other is that early signs are that the Trump administration is prepared to reduce obstacles that could otherwise stand in the way of provisions designed to boost housing production.
Both bills call for lifting the Public Welfare Investment (PWI) Cap, which governs banks’ ability to invest in projects that support low- and moderate-income communities or families, from the current 15 percent to 20 percent. States allocate low-income housing tax credits (LIHTC) to developers, who then sell the credits, mostly to banks, to raise equity and limit the amount of debt needed to finance a project.
Stumbling Block to LIHTC Expansion
An expansion of LIHTC included in last year’s One Big Beautiful Bill is expected to finance more than 1.2 million additional affordable housing rental units over the next decade. But reaching that goal will likely require $5 billion to $7 billion in new tax credit equity in addition to the $28.9 billion invested in 2024.
Last July the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac could each increase their investment in the credits from $1 billion to $2 billion. But neither has been able to get the $2 billion out the door. Raising the PWI cap would increase banks’ ability to invest in the credits.
“PWI is the most significant demand-side provision in the bill,” said David Gasson, a partner at MG Housing Strategies. “It would bring supply and demand more in sync.”
In 2024, banks supplied about 80 percent of LIHTC equity. A recent Affordable Housing Tax Credit Coalition survey of 22 banks that provided nearly two thirds of all LIHTC investment in 2024 found that 42 percent of the investments came from banks that were at or near the 15 percent cap.
The last time the PWI cap was raised (from 10 percent to 15 percent) in 2006, it triggered a dramatic increase in investment. The annual amount of public welfare investment by national banks has risen from $3.1 billion in 2005 to $27.9 billion in 2024. Growing demand for these credits is particularly timely as LIHTC pricing has dipped recently, creating funding gaps in housing projects.
“Raising the PWI cap is effective, fast, doesn’t cost anything and, just as important, politically feasible,” said Affordable Housing Tax Credit Coalition CEO Emily Cadik.
Buy American Raising Costs
Both bills also address major construction procurement issues resulting from the 2021 Bipartisan Infrastructure Law, which created a buy American mandate that requires builders to isolate the components of a project and identify the source of each.
The time and cost associated with conducting the analysis delays projects and makes them more expensive. Sometimes there are no American manufacturers that produce a component – or that produce it in sufficient quantity – which triggers a lengthy waiver process and still more costs.
Fearing that these Build American Buy American (BABA) provisions could stall potential housing development gains under the pending legislation, housing industry leaders including the Housing Advisory Group, CHAPA and New England developers met with the Office of Management and Budget’s Made in America Office to explore BABA waiver relief.
Early signs are promising. Agency leaders expressed openness to issuing general waivers for products that either aren’t domestically available or not available in sufficient quantity for a year, with the waivers to be reviewed annually. There is interest in leveraging AI for research on availability of domestically produced materials and working directly with the federal Department of Housing and Urban Development to assist with processing waivers.
Key to this will be quickly identifying the relevant materials. The National Housing & Rehabilitation Association and others are taking the lead with the development community to compile a list of items and materials that are difficult to source domestically. Simultaneously, a bipartisan group in Congress is working to include a provision in the next appropriations bill that directs HUD to examine the impacts of BABA on housing.
One key to getting to the finish line on a housing bill this year is for key members of the House and Senate committees to address their differences via negotiation rather than a formal conference committee. Having key legislators tackle the relatively minor differences between the bills would expedite getting the final product in front of a willing partner in the White House.
Whatever the approach, it’s clear that affordability is American voters’ top priority. This is a clear win for housing, and the time for action is now.
Susan Gittelman is executive director of B’nai B’rith Housing, a nonprofit affordable housing developer currently working in Boston, MetroWest and the North Shore.
