OBBBA LIHTC Updates for Affordable Housing Developers

The One Big Beautiful Bill Act (OBBBA) delivers long-awaited enhancements to the Low-Income Housing Tax Credit (LIHTC) program—provisions that could reshape how projects are financed, especially those relying on 4% credits.

At the top of the list is a 12% increase in the annual 9% credit allocation starting in 2026. This will raise the per capita cap from $3.00 to $3.36, pumping an estimated $132 million more in tax credits into the system each year. For states, this translates to more awards and potentially faster pipelines.

But the most impactful shift may be the reduction in the Private Activity Bond (PAB) test from 50% to 25% for 4% LIHTC deals. This simple technical adjustment could unlock over a million new affordable units over the next decade. Why? Because many deals that previously failed to meet the 50% threshold, due to cost or timeline constraints, can now qualify with less debt financing and more flexibility.

The OBBBA also makes the New Markets Tax Credit permanent and locks in a $5 billion cap. These provisions create long-term financing predictability, especially for developers looking at multi-phase or mixed-use affordable housing projects in low-income areas.

However, the bill wasn’t without omissions. Provisions for a 30% basis boost in rural or tribal areas were left out, creating potential gaps in feasibility for certain geographies. Stakeholders in those areas will need to be creative, seeking out alternative subsidies, partnerships, or technical assistance to make deals pencil.

With these changes taking effect in 2026, the planning window is now. Developers must model new deal structures, reassess bond financing strategies, and prepare for shifts in Qualified Allocation Plans (QAPs). Housing agencies should anticipate larger applicant pools and consider updating scoring criteria to reflect the new rules.

With LIHTC enhancements coming in 2026, it's critical to have a trusted partner to recalibrate your financing strategies and align with evolving QAPs and bond requirements. CSH’s Affordable Housing specialists help navigate these complexities—from LIHTC application reviews and PAB structuring to cost certifications, exit planning, and ongoing compliance

We offer tailored audit, tax, and business advisory support, ensuring your project meets regulatory standards and achieves financial resiliency. Trust CSH to help you unlock value and bring your next affordable housing development to life.