Big changes have come to the low-income housing tax credit (LIHTC) program this year after the recent passage of the One Big Beautiful Bill (OBBB).
Affordable housing leaders estimate the legislation could help finance 1.2 million additional affordable homes over the next decade that otherwise would not be built.
OBBB provided a permanent 12% housing credit allocation increase and reduced the program’s bond financing threshold test to 25% beginning this year, lowering a barrier to affordable housing production and helping states to make more efficient use of their bond resources.
Tony Bertoldi, CEO of CREA, discusses the impact of the changes and other key trends in affordable housing. CREA is No. 7 on the National Multifamily Housing Council’s list of the nation’s top LIHTC syndicators.
What is your outlook for the LIHTC market this year?
My outlook is positive. We are still energized by the passage of OBBB that resulted in a historic increase in the size of our market and paves the way for the construction or preservation of additional affordable homes at a time when our country needs them the most. While it is currently stalled, as of early May, there is pro-housing legislation in D.C. that could modernize several housing programs, as well as potentially unlock additional investor demand with the increase to the public welfare investment (PWI) limitation. The House and the Senate have each passed bills containing the PWI provision, but the two need to reconcile their differences into one bill that will pass both chambers. I am optimistic that they will. LIHTC pricing has slightly dropped due to the surge in additional supply, but deals are progressing and continuing to close. CREA is well positioned to participate and grow in this expanding market. We have strong partners, a deeply experienced team of professionals, and the full support of our board and ownership.
What has been the impact of the OBBB changes so far?
I mentioned above that the increase in supply has put downward pressure on pricing. We expected this in the short term. To offset this increase in supply, the Federal Housing Finance Agency increased the investment limits for Fannie Mae and Freddie Mac, infusing $2 billion of additional investment into the market. Energy credits are burning off or expiring, and we expect to see some of that tax credit appetite shift to LIHTC. The PWI provision in the D.C. housing bill is also expected to influence bank demand. While the impact is harder to measure, early estimates indicate an increase in demand could be $1 billion to $2 billion—potentially more—assuming those same banks have the tax liability to utilize the credits. That said, the market needs time to settle and allow the impact of demand to take effect. Ultimately, OBBB will have the desired effect of producing more affordable homes, which was Congress’ intent and a vital need for communities across the country.
What are CREA’s priorities for 2026?
Our priorities remain the same as they have for the past decade. We’re focused on strengthening our existing investor and developer relationships, while also strategically expanding our base with new proprietary investors and certain established developers with whom we’ve yet to collaborate with. We continue to develop and explore adjacent offerings that add value to our LIHTC equity syndication platform. We have nurtured several debt relationships while prioritizing our bank investors’ needs. Our PARIS insurance program has reduced insurance expenses for our partners and created much goodwill across our developer network. We are engaged in early-stage discussions regarding a prospective LIHTC development partnership and remain open to mission‑aligned partnerships as we continue exploring innovative ways to support the industry and our partners as a whole. Within CREA, we are proud of the reputation and culture built by a team of people who are the best in the business. We are constantly exploring ways to make their experience at CREA better, which extends to better experiences for our partners.
Are you seeing any changes in the type of affordable housing that’s being built?
There is a recurring theme around the cost of construction and high interest rates impacting development sources and uses. High operating expenses have applied additional pressure in this area. There are many conversations about modular construction, micro units, and other innovative construction techniques to address the cost per unit, but I have not yet seen these strategies adopted in a material way. With funding from other sources canceled or pulled back, the need for affordable, permanent supportive housing (PSH), dovetailed with the LIHTC, is increasing. Our friends at the Affordable Housing Investors Council published new guidelines for the underwriting of PSH, which we support and are aligned on. However, specifically as it relates to the type of housing being built, I do not think we are seeing a significant shift across the country. Having worked in all 50 states and multiple territories, we see numerous geographic differences in terms of the type of architecture and building design, but that has not shifted in the past year or because of the OBBB.
What trends are you watching this year?
As participants in this market, we cannot ignore the two primary related indicators we are seeing. Those include increased supply of LIHTCs and reduced pricing as a result. The price per credit has declined roughly 3 to 5 cents across the board, and we’re seeing significantly more deal flow than in previous years. Again, this increase in supply is the intended effect of the passage of the OBBB and will increase housing production. Our hope is that the decrease in pricing is temporary as demand catches up with legislation, regulatory change, corporate earnings, and investor behavior.
What excites you about the affordable housing industry today?
More than at any other point in my career, there is genuine bipartisan energy around housing production coming out of D.C. and among industry participants. Last year was the summer of housing with what seemed to be positive legislation and the advancements of housing policy. That energy has continued into this year, stemming from the very personal experiences Americans have with their housing needs and costs. Their voices are being heard, and D.C. is responding. Housing is not a red or blue state issue; it impacts everyone. We feel that momentum in our daily work, and it drives us at CREA to continue delivering on our mission of affordable housing everyone can be proud of.