Fact Sheet: Key Housing Provisions in the Reconciliation Bill
A summary of housing and community development policies enacted in the One Big Beautiful Bill Act
Introduction
This week, Congress passed H.R. 1, the One Big, Beautiful Bill Act, through budget reconciliation. The bill includes significant policy changes for the Medicaid program, immigration, and the tax code. This fact sheet summarizes key housing and community development provisions.
Key Tax Provisions
LIHTC Expansion and Strengthening
Permanently provides a 12% increase in the allocation of 9% Low-Income Housing Tax Credit (LIHTC) credits.
Permanently reduces the private activity bond financing requirement for 4% LIHTC credits from 50% to 25%.
New Markets Tax Credit Permanency
Permanently extends the New Markets Tax Credit.
Opportunity Zone Permanency and Changes
Permanently authorizes Opportunity Zones in the tax code with new, 10-year designations made by governors (subject to Treasury approval) beginning in 2026 and every 10 years going forward.
Modifies the definition of low-income community to:
Having a median household income which does not exceed 70% of the metro area median household income/statewide median household income for non-metro areas; or
Having a poverty rate of 20% AND
For non-metro tracts, the census tract’s median income must be less than 125% of statewide median family income; or
For metro area tracts, the census tract’s median income must be less than 125% of the metro area median income.
Census tracts contiguous to low-income census tracts no longer qualify for Opportunity Zone designation.
Changes the schedule for step-up basis for capital gains invested in a Qualified Opportunity Fund (QOF). Under the Senate-passed text, capital gains invested in a QOF where the investment would receive a 10% step-up basis (30% for rural QOFs) when it’s held for 5 years.
Gains must be recognized in year 5 (with reduction in gains based on the stepped-up basis).
For QOF investments held for 10 years or more, gains on those investments continue to be excluded from taxable income.
Creates a new rural QOF, which is a QOF that holds at least 90% of its assets in qualified opportunity zone property (either business property, stock, or a partnership interest) substantially all of which, or substantially all of the use of which, is in an entirely rural area, where rural area.
Rural area is defined as any area that is NOT a city or town with a population of more than 50,000, or an urbanized area contiguous and adjacent to such a city or town.
Lowers the substantial improvement threshold in rural areas (as defined in the Senate language) from 100% to 50%.
Adds reporting requirements.
Termination of and Restrictions on Clean Electricity Investment Credit
Terminates the tax credit early for wind and solar investments that begin construction more than one year after enactment of the reconciliation bill.
For wind and solar investments that begin construction more than one year after enactment, investors would only receive the credit if facilities were placed in service before December 31, 2027. This early termination does not apply to energy storage technology.
The existing credit phase-out percentages remain in place for other electricity sources and for wind and solar investments that begin construction within one year of enactment of the reconciliation bill.
Prohibits use of the tax credit for any facility or interconnection property that begins construction after December 31, 2025 and receives material assistance from a prohibited foreign entity.
Prohibits receipt of the tax credit by a specified foreign entity or a foreign-influenced entity.
Denies the tax credit for solar water heating property or small wind energy property in years in which a taxpayer leases the property.
Phases in new domestic content requirements for all clean electricity investment tax credit property that begins construction after June 16, 2025.
Changes to Corporate Charitable Giving Deductions
Limits deductions for corporate charitable giving to amounts that exceed 1% of a corporation’s taxable income and that are less than 10% of the corporation’s taxable income, with the ability to carry forward disallowed amounts for up to 5 years.
Repeal of other Inflation Reduction Act Energy Efficiency Provisions
The Senate bill also repealed:
Energy Efficient Home Improvement Credit
Residential Clean Energy Credit
Energy Efficient Commercial Buildings Deduction
New Energy Efficient Home Credit
Increase in the Debt Ceiling
Includes a $5 trillion increase in the debt ceiling.
Other Key Reconciliation Bill Provisions
CFPB: Reduces the maximum amount of funding the Consumer Financial Protection Bureau (CFPB) can request from the Federal Reserve from 12% of Federal Reserve operating expenses to 6.5%.
GRRP: Rescinds unobligated balances of the HUD’s Green and Resilient Retrofit Program (GRRP) created in the Inflation Reduction Act.
SEC Reserve Fund: Sweeps funds from the SEC’s Reserve Fund and prevents the fund from being used in the future.
DPA: Provides $1 billion under the Defense Production Act to be used for purposes determined by the Administration.
Reconciliation Provisions Removed
The following provisions that NAAHL had been monitoring were considered in the House or Senate but were removed prior to passage:
Public land sales for development: The Senate Energy and Natural Resources Committee had included proposals to require the sale of public land owned by the Bureau of Land Management and the National Forest Service for use for housing and housing-related infrastructure. This provision was removed prior to passage.
Excise tax on clean energy facilities: Earlier Senate text had included an excise tax on new wind and solar energy facilities that used more than an allowed amount of material assistance from a prohibited foreign entity. That provision was removed before passage.
Limitations on certain Federal Reserve employee pay: Earlier Senate text would have reduced compensation allowed for Federal Reserve employees not involved in monetary policy functions. Those provisions were removed.
10-year delay in 1071 small business data collection: Earlier Senate text would have delayed the implementation of a CFPB rule on small business data collection required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. That provision was removed.