Housing Assistance Council Statement on Reconciliation Legislation

On July 4, President Trump signed into law a sweeping reconciliation package that includes several important tax and housing provisions—some that mark long-sought progress for affordable housing in rural communities, and others that fail to address persistent gaps in federal support.

“The most positive provisions of this broad and complex bill are the tax incentives that aid community development and housing, including several that recognize the unique housing market dynamics and capital needs of rural communities,” said David Lipsetz, President & CEO of the Housing Assistance Council (HAC). “Unfortunately, these are coupled with measures that will dramatically increase the cost of food and doctor visits for poor, small town families while giving tax cuts to wealthy people living in high income areas and corporations headquartered in far off cities. That hardly seems like a good deal for people living in rural and Tribal areas.”

The reconciliation act’s improvements to the rural housing and community development landscape include:

Low-Income Housing Tax Credit (LIHTC) Improvements: The package makes permanent the 12 percent allocation increase for 9 percent LIHTC credits and lowers the private activity bond threshold from 50 percent to 25 percent. These are major wins for housing developers, helping to unlock more financing and expand project feasibility in high-cost or low-income regions, including in rural and Native communities.
Targeted Opportunity Zones (OZ) Reform: The bill revises the Opportunity Zones program by increasing basis percentages and reducing the substantial improvement test requirements to 50 percent. It also adds a marginal incentive to invest in small cities, exurban areas, and places with fewer than 50,000 people. Presumably this is to address the failure of the original OZ program to generate activity in rural communities.
Permanent Extension of New Market Tax Credit (NMTC): The bill makes the New Markets Tax Credit permanent, providing long-term certainty for lenders and investors in underserved rural areas. NMTCs have played an essential role in bringing grocery stores, health centers, and community facilities to areas where traditional financing does not reach.

The affordable housing and community development sector hoped several other broadly supported, bipartisan proposals would be adopted in the bill, but they were left out of the final version. These remaining gaps and challenges include:

No Rural Difficult Development Areas (DDAs) Provision: Although contained in the initial House-passed reconciliation bill, the final legislation failed to include a longstanding provision of the bipartisan Affordable Housing Credit Improvement Act that would designate rural and Native communities as Difficult Development Areas for LIHTC purposes. This denied a 30 percent basis boost that would have helped projects in these communities overcome historically lower credit pricing and tighter capital margins. This omission is significant and jeopardizes growth in rural areas.
Neighborhood Homes Investment Act (NHIA) Excluded: The Neighborhood Homes Investment Act, which would have supported rehab and construction of owner-occupied homes in distressed rural neighborhoods, was not incorporated into the final reconciliation act. This omission is a particularly painful loss for communities with aging housing stock and no clear source of gap financing.
Misaligned OZ and LIHTC Standards: While the Opportunity Zones reforms for rural areas are a step forward, the continued disconnect between the OZ and LIHTC substantial improvement tests leaves many rural revitalization efforts out of reach.
Food and Healthcare Made More Scarce and Expensive: Provisions in the bill restrict eligibility for SNAP and Medicaid while reducing resources to veterans and decimating access to rural These cuts will hurt rural families who earn less than is needed to buy food and go to the doctor while still paying their mortgage or rent. Some of these cuts are set to phase in over the course of several years.

“We are grateful to the Members of Congress who championed the housing and community development tax incentives in this massive, fast-moving legislation,” said David Lipsetz. “Hopefully Congress finishes the job on a bipartisan basis later this session, leveling the playing field for all Americans by identifying rural areas as DDAs, adopting NHIA, and aligning OZs with LIHTC.”

Read a more detailed HAC analysis of the final reconciliation act.