The “One Big Beautiful Bill Act” (OBBBA or The Act) was signed into law by the President on July 4, 2025. This far-reaching budget reconciliation bill will deeply impact affordable housing development, operations, and support for low-income people. Below, we will explore some of the major provisions and potential impacts in the OBBBA from an affordable housing and human services lens. We will also share additional federal actions and impacts outside the OBBBA that are worth watching.
In summary:
- OBBBA impacts:
- Expands and strengthens the low-income housing tax credit program
- Permanently extends Opportunity Zones and New Market Tax Credits that are meant to spur economic growth and investment in low-income communities
- Rescinds Green Building Funding and Tax Incentives
- Restricts and cuts Medicaid, SNAP, and CHIP programs
- Shifts tax burden and increases the debt limit and federal deficit
- Non-OBBBA impacts:
- This fall, the budget appropriations process has the potential to change Department of Housing and Urban Development (HUD) programs and funding levels. There are currently three separate proposals for the budget from the President, House, and Senate that must be negotiated into a final version due by October 1st. In particular, the President’s proposal would make historically signification cuts to housing and homelessness programs, the House version rejects many of the President’s drastic cuts but still reduces funding levels, and the bipartisan Senate version maintains, and even increases, overall funding levels for HUD—as you can see in this comparison.
- Additional executive actions will continue to create unpredictability and risks for housing production and operations through executive orders, tariffs, legal uncertainty, immigration actions, recission packages, and nonpayment of approved funds.
What’s in the OBBBA and What’s the Potential Impact?
Background: Reconciliation vs. Appropriations. The OBBBA used the federal budget reconciliation vs. appropriations process. Reconciliation is a streamlined process that enables congress to make changes to revenue, debt limit, and mandatory spending (i.e. spending mandated by previous laws that don’t need to be allocated annually including Medicaid, SNAP, and Social Security). A reconciliation package can be passed with only 50 votes in the Senate and cannot be filibustered. By contrast, budget appropriations is an annual process where Congress sets discretionary funding levels for federal agencies and programs, requiring 60 votes in the Senate. The appropriated “discretionary” spending includes areas like housing, transportation, education, and the military.
The reconciliation process restricted what budget items could be covered in the OBBBA, meaning that there will be ongoing federal budget discussions through the Appropriations process in fall 2025 that will likely impact HUD housing programs and other federal assistance beyond what is covered by the OBBBA. See this budget comparison chart for the appropriations budget being proposed by the President’s office and House and Senate Appropriations Committees.
OBBBA Provisions Relevant to Affordable Housing
Affordable Housing Credit Improvement Act. Included in the OBBBA is the bipartisan Affordable Housing Credit Improvement Act (“AHCIA”). This expands and strengthens the Low-Income Housing Tax Credit (“LIHTC”), which has financed over 3.7 million affordable homes since being enacted in 1986.
- Potential Impact: The AHCIA is estimated to support an additional 1.94 million affordable rental homes over 10 years. This is a bright spot in the OBBBA that will expand affordable housing creation across the U.S. While there are many provisions in this bill, two of the most impactful provisions are:
- Increased tax credits – There is already far more demand for low-income housing tax credits than are allocated. This will expand the 9% housing credit allocations by restoring a 12.5% cap increase and further increasing allocations by 50% over two years.
- Require less Private Activity Bonds – Projects using 4% housing credits are required to use a minimum percentage of private activity bonds to get awarded full credits. This provision lowers the Private Activity Bond financing threshold from 50% to 25%. As a result, states will be able to make more efficient use of their bonding resources and developers have more flexibility with how they finance projects.
Other tax incentives for housing development. The OBBBA makes Opportunity Zones (OZ) from the 2017 Tax Cuts and Jobs Act permanent and modifies the program. According to the IRS, OZs are meant to “spur economic growth and job creation in low-income communities while providing benefits to investors.” The OBBBA also makes the new markets tax credit (NMTC) permanent with a $5 billion annual allocation authority for congress.
- Potential Impact: These additional tax incentives are meant to help investments flow to low-income areas and “community development entities.” These programs fund a variety of things, including affordable housing.
Rescinds Green Building Funding and Tax Incentives. The OBBA rescinds all unobligated funds for the Green and Resilient Retrofit Program (GRRP) that provide funding for owners and operators of multifamily housing to make energy efficient upgrades and repairs to increase disaster resiliency. In May, Republicans expected this cut to save $5 billion in federal spending over 10 years. The Act also significantly accelerates the end to many federal energy tax credits for residential buildings.
- Potential Impact: The rescission of GRRP funding will decrease future funding opportunities to support green buildings and comply with increasingly stringent energy codes. This can lead to less housing overall and may disrupt pipeline projects that haven’t yet received funds.
Restrictions/Cuts to Medicaid, SNAP, and CHIP programs. The OBBA changes requirements for federal programs like Medicaid, Supplemental Nutrition Assistance Program (SNAP), and Children’s Health Insurance Program (CHIP) that are meant to support the health and nutritional needs of low-income families and individuals. Major changes include expanded work requirements for people to get and retain coverage, increased reporting and administrative requirements, reduced retroactive coverage, and more. The nonpartisan Congressional Budget Office (CBO) estimated that the OBBBA will cut federal spending on Medicaid and Children’s Health Insurance Program (CHIP) benefits by $1.02 trillion, due in part to eliminating at least 10.5 million people from the programs by 2034. Almost 80 million people were enrolled in Medicaid and CHIP in March 2025.
- Potential Impact: The changes to social support will “cost people their health care coverage [or food benefits], not because they are ineligible, but because they missed a deadline or could not navigate a complex system” (AARP). This will worsen financial stresses for many low- and moderate-income Americans that rely on these public benefits to stay healthy and retain limited money for other needs. These changes will also have knock-on effects for housing. For example, while Medicaid funds cannot be used to pay for rent or the construction of housing, states can leverage Medicaid funding to support housing-related services that help people find and keep housing such as housing navigation, tenancy support, and assistance with moving costs. Medicaid funds can also pay for health-related services in supportive and transitional housing, which housing providers rely on to financially support and deliver vital health services to qualified residents. With decreased federal support for housing services and care, we could see deeper operational crises for permanent supportive housing and transitional housing providers.
Taxes & Projected Deficit. The Congressional Budget Office (CBO) estimated that the House version of the OBBBA would cause the lowest 10% of income earning households to lose an average of $1,600 per year because of cuts to assistance programs while the 10% of highest earning households are expected to retain an additional $12,000 per year. In addition to regressively restructuring taxes and making cuts to social programs, the OBBBA adds new spending (ex: $325 billion in spending on immigration enforcement and defense) and raises the debt limit by $5 trillion. In total, the CBO estimates the bill will add over $3.9 trillion to the federal deficit over the next decade.
- Potential impacts: An increased national deficit may increase borrowing costs for the near future. High interest rates raise development costs for affordable housing providers which can decrease the production of affordable housing or threaten pipeline projects. Increased tax burden on low-income residents, combined with decreases to programs like Medicaid and SNAP, may create greater housing instability and financial strain for many families.
On a more positive note, the OBBBA allows enhanced tax deductions for repairs and maintenance and 100% bonus depreciation which may help stabilize operations over time and incentivize more building. The Act also temporarily increases the state and local tax (SALT) deduction from $10,000 to $40,000 for individuals earning under $500,000 per year, which primarily benefits higher-income earners in high-tax states.
The OBBBA reconciliation package created a mix of impacts including a historical expansion of Low-Income Housing Tax Credits and Opportunity Zone funding alongside other policies that press harder on low-income families and immigrants. Now, other federal actions amplify an environment of deep uncertainty for the affordable housing sector and for those who rely on affordable housing. Increased national advocacy, creative problem solving, and local coordination are essential to filling service and care gaps that will open up as funding levels, priorities, and requirements shift dramatically.
This is part 1 of HDC’s deep dive into expected federal impacts on affordable housing from the “One Big Beautiful Bill Act.” You can read part 2, focusing on appropriations & executive action, here.