As with any election year, there is tremendous uncertainty around the 2025 political landscape and what opportunities or challenges there will be for housing policy.
The range of scenarios when it comes to appropriations, the treatment of federal agencies, fair housing and civil rights, and regulatory agendas can feel overwhelming to prepare for. But there is one critical piece of the puzzle that policymakers and advocates should be planning for with a clear vision, and that is the potential tax legislation in 2025.
Are You Ready for Some… Tax?
Several key provisions from the Tax Cuts and Jobs Act (TCJA) are set to expire at the end of 2025, setting the stage for what some are calling the “Super Bowl” of tax. The TCJA was passed in 2017 but unless Congress acts, individual taxpayers and businesses would see a tax increase due to expiring provisions, which is why it is all but certain that Congress will take up a tax package in 2025.
Now there are still many factors at play when it comes to the scale and focus of a 2025 tax package. First, the outcome of the election. It is most likely that we will continue to have divided government, requiring bipartisanship and a negotiation of priorities both in terms of TCJA as well as other priorities, such as housing, that try to join the rare “vehicle” that is the tax package. Further, the estimated cost of a full extension of the expiring TCJA provisions is more than $4 trillion, so there will be debates on how to offset these costs and the size of the package.
If tax discussions aren’t your usual favorite topic, congratulations on making it this far. Here’s how it relates to affordable housing and homeownership…
Americans Deserve a Tax Code that Helps Renters and Homeowners
When it comes to addressing the national need for more affordable homes for renters and homeowners, we need an “all the above” approach. It’s important to note that advocates must also be focused on key appropriations, regulations, and legal developments, but several pillars to boosting affordable housing supply are based in the tax code. The two strongest contenders and leading housing priorities
for a 2025 tax package are the Low-Income Housing Tax Credit and the Neighborhood Homes Credit.
The Low-Income Housing Tax Credit (Housing Credit). When asked what the most impactful action Congress could take to boost housing supply is, the answer is simple: pass the Affordable Housing Credit Improvement Act (AHCIA). AHCIA (S. 1557 and H.R. 3238) is the bipartisan legislation to expand and strengthen the Housing Credit, and key provisions from (or closely mirroring those in) the popular bill are the most likely housing provisions to be considered for a 2025 tax package.
In January, the House passed the Tax Relief for American Families and Workers Act (H.R. 7024), which included two key Housing Credit provisions: temporarily restoring the 12.5 percent increase to the 9 percent Housing Credit and lowering the bond financing threshold to 30 percent to facilitate increased production with the 4 percent Housing Credit. These key provisions, alongside other AHCIA provisions to expand and strengthen the Housing Credit such as enabling it to better serve hard-to-reach rural and Tribal communities as well as extremely low-income households, must be included in the next tax package.
The Neighborhood Homes Credit. Modeled off the successful public-private partnership design of the Housing Credit, the Neighborhood Homes Credit is a complimentary tax proposal to boost affordable homeownership and revitalize distressed urban, suburban, and rural communities. The Neighborhood Homes Investment Act (S. 657 and H.R, 3940) would establish a new tax credit to attract capital to build and rehabilitate homes for lower- and middle-income homeowners, with a focus on communities with the greatest need for investment.
Like the Housing Credit, Neighborhood Homes has garnered bipartisan support in the Senate and the House, and the national call for affordable homeownership solutions positions this critical proposal well for a larger 2025 tax package.
It’s no coincidence that both proposals have bipartisan support. Other housing proposals that could gain momentum depending on the political landscape include an extension and improvements to Opportunity Zones, which would be more likely under Republican leadership, or some of the new proposals from the Biden-Harris Administration, like a tax credit for middle-class first-time homebuyers or a credit to middle-class families who sell their starter home to another owner-occupant.
How We Can Secure Housing Wins
It’s no secret that housing has disappointingly been largely left out of recent sweeping legislation for infrastructure and climate investments. Simultaneously, housing supply and affordability is a top issue for voters nationwide in ways we have never seen before. If there was ever a time for housers to be united and to demand action from our elected officials, it is now.
Conversations on a 2025 tax package have begun. The Senate Finance Committee and the House Ways and Means Committee will stand up more structure and process, but the first out of the gate was House Ways and Means Committee, which announced ten Republican “tax teams” to craft policy proposals for Republican leadership to consider. This includes a Community Development Tax Team, which is considering housing-related proposals, that has been engaging stakeholders, and has solicited recommendations from the general public by October 15, 2024.
There are great resources for advocates to engage Members of Congress already out there. For the Housing Credit, the ACTION Campaign and the Affordable Housing Tax Credit Coalition provide timely updates, fact sheets, talking points, and more. For the Neighborhood Homes Credit, the Neighborhood Homes Coalition meets regularly with supporters and provides interactive maps and other advocacy tools. In addition, housing groups are mobilizing around a national, grassroots call on Congress that a tax package must include housing solutions, so advocates nationwide should stay plugged in with groups like NAAHL and NHC for more opportunities to join the push and stay engaged.
Americans will be making some big decisions in November about the direction of our country, but one thing is for sure: we all need more affordable housing solutions. If we are united in our demands that housing cannot be left off the table, or more specifically out of the 2025 tax package, I am confident that we can win big for the communities we serve.
Sarah Brundage is the president and CEO of the National Association of Affordable Housing Lenders (NAAHL).
