Affordable Housing Credit Improvement Act of 2025

Bill Number: H.R. 2725
Origin Chamber: House
Congress: 119th Congress, Session 1
Policy Area: Taxation
Status: Introduced
Latest Action: 2025-04-08: Referred to the House Committee on Ways and Means.
Last Updated: 2026-05-22T08:07:47Z

AI-Generated Summary

Purpose of the Legislation

The Affordable Housing Credit Improvement Act of 2025 aims to reform the existing low-income housing tax credit program under the Internal Revenue Code (renamed the "affordable housing credit") to expand access to affordable rental housing. It increases funding allocations, broadens tenant eligibility, simplifies project requirements, provides targeted support for underserved groups like Native Americans and rural residents, and promotes program transparency to address housing shortages.

Key Provisions

The bill is structured into eight titles, each addressing specific reforms:

Title I: Reform of State Allocation Formulas

Increases annual state allocations for housing credits: Starts at $4.25 per capita in 2025 (up from $1.75), with a minimum of $4,876,000 per state.
Includes cost-of-living adjustments for future years, rounded to multiples of 5 cents or $5,000 as needed.
Applies to calendar years after December 31, 2024.

Title II: Reforms Relating to Tenant Eligibility

Applies the "average income test" (allowing units to qualify if average tenant income is at or below 60% of area median gross income) to projects financed by exempt facility bonds.
Codifies rules for handling tenant income increases: Units remain low-income if initial income was ≤60% of median (or ≤80% for certain cases) and rent stays restricted; extends to 120% for rehabilitated properties.
Modifies student occupancy rules: Full-time students under age 24 generally cannot occupy low-income units, but exceptions apply for federal programs, married individuals, people with disabilities, veterans, parents, domestic violence victims, human trafficking survivors, emancipated minors, foster youth, or homeless youth.
Counts tenant-based voucher payments (e.g., Section 8) as rent for projects using the average income test.
Requires protections for domestic abuse victims: Prohibits eviction or lease denial based on related criminal activity by household members if the tenant is a victim; allows lease bifurcation (separating abusive tenants) without disqualifying the unit; clarifies public use rules to include victims.
Clarifies general public use requirement to explicitly include veterans as qualifying under federal programs.
Effective dates vary: Some after December 31, 2024; others after 2025 or upon enactment.

Title III: Rules Relating to Credit Eligibility and Determination

Prevents credit recapture (tax repayment) for casualty losses (e.g., from federally declared disasters) if the building is reconstructed or replaced within 25 months (extendable to 37 months in some cases); maintains qualified basis during this period.
Modifies acquisition rules: Limits basis (cost used for credit calculation) for buildings in service <10 years to the lowest prior purchase price (adjusted for inflation) plus seller's improvements; shortens non-ownership lookback from 10 to 5 years.
Allows relocation costs (e.g., payments to tenants, temporary housing) to count as rehabilitation expenditures for tax purposes.
Repeals the population cap on qualified census tracts (areas eligible for extra credits due to poverty or low income).
Empowers housing credit agencies to determine if projects align with community revitalization plans, using flexible criteria like geographic specificity, implementation goals, investment strategies, and demonstrated need.
Prohibits qualified allocation plans from favoring projects based on local official support/opposition or government contributions (unless part of broader funding leverage).
Increases eligible basis by 50% (to 150% of normal) for projects with ≥20% units for extremely low-income households (≤30% of median income or federal poverty line), if designated necessary by the agency.
Removes volume cap on extra credits for bond-financed projects designated by agencies.
Eliminates basis reduction for properties claiming the energy-efficient commercial building deduction (Section 179D).
Restricts "planned foreclosures" to terminate compliance periods only if not part of an abusive arrangement.
Raises population cap for difficult development areas (eligible for extra credits due to high construction costs) from 20% to 30%.
Requires agencies to review project development costs for reasonableness in allocation plans.
Increases tax-exempt bond financing requirement from 50% to 25% of project costs for new issues after enactment.
Effective dates vary: Most after December 31, 2024 or 2025; some retroactive or upon allocation.

Title IV: Reforms Relating to Native American Assistance

Requires state allocation plans to consider housing needs of enrolled tribal members, Alaska Native corporations, and certain Native Hawaiian families.
Designates Indian areas (tribal lands and housing areas under federal law) as difficult development areas for extra credits, but only for projects assisted under Native American housing laws or sponsored by tribes/entities.
Applies to buildings placed in service after December 31, 2025.

Title V: Reforms Relating to Rural Assistance

Designates rural areas (non-metropolitan or as defined under federal housing law) as difficult development areas, based on state allocation plans.
Removes the special 30% income limit cap for rural projects, allowing uniform eligibility rules.
Applies to buildings after December 31, 2025, and taxable years after 2024.

Title VI: Exempt Facility Bonds

Revises refunding rules for bonds financing residential rentals or mortgages: Allows refinancing if loan repayments fund new similar projects within 12 months; extends lookback to 10 years and removes one-refunding limit, but excludes chained refinancings.
Applies to issues after enactment (some retroactive to 2008).

Title VII: Affordable Housing Tax Credit

Renames Section 42 of the Internal Revenue Code from "low-income housing credit" to "affordable housing credit" throughout the code and tables.

Title VIII: Data and Transparency

Expresses congressional intent to enhance data sharing among federal agencies for program transparency.
Urges incentives to discourage discriminatory land use/zoning policies and promote reforms to increase housing supply.

Significant Changes to Existing Law

Funding Boost: Triples per capita allocation and raises minimums with inflation adjustments, significantly expanding available credits (previously static at $1.75/$2M since 2018).
Eligibility Expansions: Broadens tenant protections (e.g., for income rises, students, victims, veterans); integrates voucher assistance; removes rural income caps and census tract limits.
Project Flexibility: Eases reconstruction after disasters, limits acquisition costs to curb speculation, allows relocation expenses, empowers agencies on revitalization, and prohibits local biases in approvals.
Targeted Incentives: Introduces 50% basis boosts for extremely low-income and bond projects; designates Native/rural areas as difficult developments; raises bond financing threshold but eliminates energy deduction conflicts.
Bond and Name Changes: Simplifies refunding without limits; rebrands program to "affordable" for broader appeal.
These changes apply prospectively (mostly post-2024/2025) but include some retroactive elements (e.g., casualty losses, student rules).

Potential Impacts

Government Agencies: State housing credit agencies gain more funds to allocate (potentially $28B+ annually nationwide) but must adopt new criteria for costs, revitalization, and equity; IRS faces administrative updates for credits and bonds. Could reduce federal revenue by increasing tax incentives (estimated billions in forgone taxes).
Citizens: Increases supply of affordable units (targeting low/extremely low-income, rural, Native, veteran, and victim households), potentially lowering rents and improving access; protections against evictions for abuse victims enhance stability. Developers may build more in underserved areas due to incentives.
International Relations: No direct impact; focuses on domestic housing policy.

Main Stakeholders Affected

Low-Income and Vulnerable Households: Primary beneficiaries, including those at ≤60% median income, domestic violence/trafficking victims, students with exceptions, veterans, foster/homeless youth, Native Americans, and rural residents.
Housing Developers and Investors: Gain from higher allocations, basis increases, and eased rules (e.g., no recapture for disasters, relocation costs), but face cost oversight and acquisition limits.
State and Local Housing Agencies: Responsible for allocations, designations, and compliance; must update plans to prioritize equity and needs.
Native American Tribes and Rural Communities: Receive targeted support through special designations and criteria.
Federal Agencies: IRS (tax administration), HUD (voucher/bond coordination), and tribal housing entities (project eligibility).

Notable Legal, Constitutional, or Political Implications

Legal: Codifies prior guidance (e.g., income increase rules) into statute for stability; anti-abuse measures (e.g., foreclosure restrictions, cost reviews) prevent misuse without new litigation burdens. Aligns with Violence Against Women Act and Native housing laws, potentially strengthening enforcement via state courts.
Constitutional: Promotes equal protection by addressing discrimination in zoning/land use and prioritizing underserved groups (e.g., tribes, victims), but avoids mandates on states to preserve federalism.
Political: Bipartisan (introduced by 100+ members); signals congressional commitment to housing affordability amid shortages, with non-binding calls for transparency and zoning reform to build future consensus. Fiscal implications include revenue loss from expanded credits, requiring budget offsets in broader tax debates. No major controversies noted, as changes build on existing program without overhauling core structure.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. LaHood, Darin [R-IL-16]

Cosponsors (168)

Rep. DelBene, Suzan K. [D-WA-1], Rep. Tenney, Claudia [R-NY-24], Rep. Beyer, Donald S. [D-VA-8], Rep. Feenstra, Randy [R-IA-4], Rep. Panetta, Jimmy [D-CA-19], Rep. Buchanan, Vern [R-FL-16], Rep. Larson, John B. [D-CT-1], Rep. Kelly, Mike [R-PA-16], Rep. Davis, Danny K. [D-IL-7], Rep. Estes, Ron [R-KS-4], Rep. Sánchez, Linda T. [D-CA-38], Rep. Miller, Carol D. [R-WV-1], Rep. Sewell, Terri A. [D-AL-7], Rep. Murphy, Gregory F. [R-NC-3], Rep. Chu, Judy [D-CA-28], Rep. Kustoff, David [R-TN-8], Rep. Moore, Gwen [D-WI-4], Rep. Fitzpatrick, Brian K. [R-PA-1], Rep. Evans, Dwight [D-PA-3], Rep. Moore, Blake D. [R-UT-1], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Malliotakis, Nicole [R-NY-11], Rep. Gomez, Jimmy [D-CA-34], Rep. Carey, Mike [R-OH-15], Rep. Horsford, Steven [D-NV-4], Rep. Yakym, Rudy [R-IN-2], Rep. Suozzi, Thomas R. [D-NY-3], Rep. Miller, Max L. [R-OH-7], Rep. Lieu, Ted [D-CA-36], Rep. Emmer, Tom [R-MN-6], Rep. Neguse, Joe [D-CO-2], Rep. Hudson, Richard [R-NC-9], Rep. Mrvan, Frank J. [D-IN-1], Rep. Reschenthaler, Guy [R-PA-14], Rep. McCollum, Betty [D-MN-4], Rep. Houchin, Erin [R-IN-9], Rep. McBride, Sarah [D-DE-At Large], Rep. Flood, Mike [R-NE-1], Rep. Kelly, Robin L. [D-IL-2], Rep. Finstad, Brad [R-MN-1], Rep. Schakowsky, Janice D. [D-IL-9], Rep. Kiley, Kevin [R-CA-3], Rep. Omar, Ilhan [D-MN-5], Rep. Salazar, Maria Elvira [R-FL-27], Rep. Peters, Scott H. [D-CA-50], Rep. Huizenga, Bill [R-MI-4], Rep. Ramirez, Delia C. [D-IL-3], Rep. Balderson, Troy [R-OH-12], Rep. Budzinski, Nikki [D-IL-13], Rep. Moolenaar, John R. [R-MI-2] and 118 more

Recent Actions

2025-04-08: Referred to the House Committee on Ways and Means.
2025-04-08: Introduced in House
2025-04-08: Introduced in House

Bill Versions

Affordable Housing Credit Improvement Act of 2025 — issued 2025-04-08 — PDF (44 pages)