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As major changes to the low-income housing tax credit (LIHTC) program take effect in 2026, the affordable housing industry is preparing for a year expected to bring both opportunity and pressure.
First, “there will be an unprecedented amount of housing credits in the market, so we need to think about solving demand,” says Bob Moss, co-founder and partner of MG Housing Strategies.
The increase comes after lawmakers passed a permanent 12% LIHTC allocation increase last July. They also reduced the 50% bond financing test to 25%. Both changes are set to begin in 2026.
Looking ahead, the industry “needs to continue to urge lawmakers to increase the Public Welfare Investment cap from 15% to 20%, which will bring more midsized banks into the housing credit for equity capital,” Moss says.
Affordable Housing Finance recently asked Moss and several other members of its editorial advisory board for their thoughts on the year ahead.
Deborah VanAmerongen, strategic policy adviser and leader of the affordable housing team at the Nixon Peabody law firm, agrees that the LIHTC expansion will be the biggest change for the industry.
“I expect we’ll see the impact of the increase in LIHTC, both from the reduction in the 50% test and the boost in 9% LIHTC, continue to play out,” she says. “There is a concern about investor demand and LIHTC pricing. Hopefully some of the proposals geared toward ensuring adequate and sustained investor demand will come to fruition.”
Jim Gillespie, executive vice president at BWE, calls 2026 a “transition year as the industry will continue to refine how the 25% bond framework works in practice.”
“This environment will continue to accelerate the participation of private and institutional capital who increasingly view affordable housing as a desirable, scalable asset class,” he says. “In 2026, success will favor sponsors and capital partners who can adapt quickly, structure efficiently, and execute with confidence in a more complex financing environment.”
How affordable housing developers and their financial partners respond to the changes may be top of mind in 2026, but it’s far from the only issue the industry will face.
“The industry will need to address the ongoing financial pressures on low-income residents, driven by inflation and reductions in HUD [Department of Housing and Urban Development] programs and vouchers,” says J. David Heller, president, CEO, and co-founder of The NRP Group. “Even in communities that are fully occupied, these pressures are contributing to a growing gap between physical and economic occupancy, as unpaid rent and rising delinquencies can impact long-term performance and stability. Addressing these challenges will require not only increased support for residents but also a sharper focus on operational efficiency and resource management within affordable housing organizations.”
The longtime developer adds the new year will “accelerate the evolution of affordable housing, shifting the industry’s focus from simply providing quality homes to addressing residents’ comprehensive needs.”
“To make projects financially viable amid current economic pressures, unique public-private partnerships will be essential, allowing developers to offer more than quality homes,” Heller explains.
In response to feedback, his firm is increasingly designing communities with on-site resources that support aspects of daily life, including child care centers, libraries, food pantries, and wellness centers. As an example, The NRP Group has partnered with health care systems, including JPS Health Network in Texas and University Hospitals in Ohio.
Industry leaders also point to other issues in store in the new year.
House and Senate appropriators are working on finishing a new HUD budget by Jan. 30, and the industry must continue to fight for programs like the Continuum of Care for homeless populations, Community Development Financial Institutions, and other programs, according to Moss.
“We have to redouble our efforts to get the administration and Congress to focus on regulatory relief,” says VanAmerongen. “We have been hopeful that advances would be made on Davis-Bacon, the National Environmental Policy Act, and the Build America, Buy America Act, but so far very little concrete progress has been made—these requirements add untold cost and time to affordable housing transactions and hinder our ability to address the housing crisis.”
2026 Predictions
The industry leaders also offered several predictions for the new year.
“I predict that equity pricing will gradually climb in 2026, due to increased competition for the housing credit,” Moss says. “It will take a while, though. I also predict at this time next year a new draft of the Affordable Housing Credit Improvement Act will be ready for launch.”
“Since there is uncertainty around which party will control the House and/or Senate after 2026, we expect the administration and current Congress to try to push through as much of their agenda as possible before year-end,” says VanAmerongen.
“We will meet and exceed any challenges we face in the coming year. We will focus on increased production, find additional investors to join us, and be vigilant asset managers of all our housing credit assets,” says Ronne Thielen, executive vice president and director of public policy and advocacy at R4 Capital.
“Interest from equity providers in affordable housing is expected to rise significantly in the second half of 2026. After a slower period of deal capitalization, partly because providers were allocating resources to solar credits, the market for tax credit equity is opening up, which should improve access to financing and support the development of new affordable units,” says Heller.