It’s been a busy year for state housing finance agencies (HFAs) as they work to implement major changes to their low-income housing tax credit (LIHTC) programs following the passage of the One Big Beautiful Bill.
Signed in 2025, the legislation provided a permanent 12% housing credit allocation and reduced the bond financing threshold test from 50% to 25%, both beginning this year.
Stockton Williams, executive director of the National Council of State Housing Agencies (NCSHA) shares the early impact of the changes and his organization’s priorities heading into 2027.
What issue or project have you been spending the most time on this year?
In the area of multifamily housing, where HFAs as a group are one of the largest sources of capital in the country, providing more than $20 billion in financing and gap funding per year, we have been focused in 2026 on advocating for the 21st Century Road to Housing Act, seeking relief from Build America Buy America (BABA) rules and certain environmental regulations, and strengthening federal support for multifamily development and rehabilitation through the government-sponsored enterprises, Federal Housing Administration, and the U.S. Department of Agriculture. And, as is the case every year, we spend a lot of time trying to secure stable, if not increased, funding for key federal housing programs from HOME to rental vouchers.
What are NCSHA’s priorities as we approach the end of 2026 and the beginning of 2027?
The last three of those four issues will remain priorities, as will working with the Department of Housing and Urban Development and other federal agencies on timely, efficient implementation of key ROAD Act provisions. We will continue work on strengthening the housing credit and housing bond programs, including advocacy for reintroduction of the Affordable Housing Credit Improvement Act and the Affordable Housing Bond Enhancement Act in the new Congress. We are also working with other organizations to protect the efficacy of the Community Reinvestment Act as a driver of affordable apartment funding and investment. And, we are part of conversations about optimal ways to expand the pool of active investors in LIHTCs. Our complete set of priorities for 2027 will come into focus after we see the results of the midterm congressional elections, asses the political environment, and engage with our members.
Now that the major LIHTC provisions have become law, what are you hearing from state HFAs about the impact on their pipelines?
Many state agencies report significant increases in applications. Allocations of 4% credits, which were increasing in the years leading up to the legislative changes in the One Big Beautiful Bill Act in 2025, are also up significantly. We obviously don’t have final 2026 numbers, but allocations could exceed $2 billion, compared with $598 million in 2022. In general, this will lead to more developments and units, which of course was the goal of the LIHTC provisions in the bill. The actual amounts will start to come into view by early next year in states that have been able to make allocations by the end of 2026.
What have been the challenges of implementing the legislative changes?
State agencies have worked hard to revise their allocation policies, reassess deals in various stages of review, and strengthen their capacity and systems to manage more applications for credits and other financing. The bigger challenges, which the whole industry is confronting, are optimizing the beneficial changes the legislation made to the credit program in light of declining credit pricing, higher interest rates, and, in a number of markets, rising development and operating costs.
What are state HFAs seeing right now that you don't think is getting enough attention nationally?
While COVID-era delays in the development timeline have lessened, many projects are still facing delays due to increased costs, supply chain disruptions due to tariffs and BABA, and staff reductions at HUD–as well as the macro issues I mentioned. These factors are forcing agencies to process historically high levels of returned credits, provide supplemental allocations where possible, and offer credit swaps to generate additional time for developments to complete construction and place in service.
What trends are you seeing in state qualified allocation plans?
In addition to provisions implementing 25% bond financing threshold in virtually every state, the most significant recent trend in qualified allocation plans is an array of approaches to support development of more units at lower costs. Dozens of HFAs have made or are in process of making significant changes in design and construction criteria, energy and environmental standards, and incentives for cost-cutting innovations. There’s also a lot of activity in aligning credit application procedures with those of other financial sources that applicants may seek to access.
What innovative programs or strategies are you seeing emerge from state HFAs that others may soon replicate?
The use of taxable bond financing with credits has almost tripled since 2022 and is part of 1 in 10 transactions these days. A couple handfuls of states are exploring new tax-exempt bond recycling approaches. State tax credit programs are more important than ever, and at least 10 states are making or considering making changes to theirs to enhance effectiveness. A great source of exemplary individual state innovations that have the potential to spread to others is the most recent set of finalists and winners in the NCSHA Annual Awards program.
What should the affordable housing industry be thinking about next?
Broadening the investor base for the housing credit, including direct outreach as well as policy changes, to stabilize and strengthen credit pricing. Scaling off-site construction and other approaches for delivering lower-cost units. Integrating artificial intelligence and other technologies to increase speed, efficiency, and quality in design, development, and operations with appropriate projections and transparency. Advocating for substantially greater amounts of easier to use forms of rental assistance to ensure the viability of developments serving the most vulnerable in our society.