2025 Policy Preview: How State, Local Issues Will Impact Affordable Housing

This past election season put housing—particularly the critical lack of affordable housing—in the spotlight. Multifamily industry officials couldn’t be more pleased.

“We want everyone running for office to be talking about housing and solving the housing affordability crisis,” J.P. Delmore, assistant vice president for government affairs, at the National Association of Home Builders, told Multi-Housing News. “So, we feel very encouraged by the fact that it has reached a level where you have presidential candidates talking about housing in a way we haven’t seen before.”

While trade groups like NAHB, National Apartment Association, National Multifamily Housing Council and developers will be watching for policy changes coming out of Washington, D.C., they will also be monitoring state, county and local governments for policies and programs that impact affordable housing too.

With Republicans taking control of the White House and Congress, NMHC President Sharon Wilson Géno said they expect to see “a doubling down of the state houses and the city councils on housing legislation.” In response, NMHC is going to be watching for what she said could be a potential “patchwork of regulations or laws that are going to change, perhaps at the state level.”

One particular issue, rent control, isn’t going away anytime soon. Prior to dropping out of the presidential race, President Joe Biden had unveiled a plan that would require owners to cap rent increases or risk losing certain tax incentives. But President-Elect Donald Trump, a builder himself, is unlikely to support a federal rent control mandate.

“That’s something we need to be diligent about, especially at the local level,” said Debra Guerrero, The NRP Group’s senior vice president of strategic partnerships and government affairs. “But making sure that we essentially kill any kind of rent control measures at the federal level is important.”

The NMHC post-election analysis notes that the Trump administration will likely be looking to promote homeownership and decrease regulatory barriers, rather than implement rent control measures. It may also try once again to take Fannie Mae and Freddie Mac out of conservatorship and privatize the GSEs as it had considered during Trump’s first tenure.

National focus on rent control remains

There were several rent control proposals on ballots across the country on Election Day, most notably Proposition 33 in California, which did not pass. It was designed to expand local governments’ authority to enact rent control. The state already limits annual rent hikes to the lower of 5 percent plus the inflation rate, or 10 percent, but Proposition 33 would have allowed local governments to impose any form of rent control they want. Current state law exempts certain properties, including multifamily units built after Feb. 1, 1995, and single-family homes, from rent control measures.

“There are some well-meaning cities that are trying to use regulation to appease a certain electorate but in the end they’re going to end up hurting that group,” noted Géno. “On the flip side, there are also local jurisdictions….particularly in wealthier neighborhoods that are trying to use rent regulation to disincentivize investment in multifamily housing and they may only have a handful of multifamily units.”

This year, the NAA tracked 218 state-level rent control bills across the country, with 22 bills reaching enactment. The association also tracked 47 local-level rent control ordinances, resolutions, studies and ballot initiatives. The vast majority were aimed to adopting, allowing or strengthening rent control in some way. Only 11 repealed, prohibited or weakened rent control at the state level.

One win for the multifamily industry came in Idaho, which passed a bill preventing local jurisdictions from enacting rent control policies. NAA is already gearing up for 2025 and identifies California, Colorado, Illinois, Maryland, Michigan, New Jersey, Pennsylvania, Virginia and Washington as states to watch in the coming year for rent control legislation.

New York is ‘City of Yes’

On Dec. 5, the New York City Council approved Mayor Eric Adams’ plan to build 80,000 new housing units across the city’s five boroughs over the next 15 years on a 31-20 vote. Known as City of Yes, the $5 billion plan leans heavily on zoning reforms in an attempt to spur more housing production.

The initiative changes, and in some cases eliminates, off-street parking requirements to make it easier for developers to build in areas with mass transit. It would allow developers to build 20 percent more housing if their projects include affordable units and also seeks to add housing above stores, in basements and in accessory dwelling units. Gov. Kathy Hochul committed $1 billion in state funding as well to move the package over the finish line.

Daniel Bernstein, attorney at Rosenberg & Estis in New York City and leader of the firm’s tax incentives and affordable housing practice, said some developers considering larger multifamily projects were waiting for the city council to act on the zoning reforms before moving forward with their plans.

“They want to see exactly how it reads, because it matters whether parking is required and how the zoning benefit will work precisely for their projects,” he said.

Bernstein is also working with developers who are taking advantage of the extension of the 421a property tax abatement. The popular exemption that incentivized affordable housing in New York City expired in June 2022. In April 2024, the state legislature approved a package of housing proposals that included an extension of 421a that extends the deadline for completing vested projects from 2026 to June 2031.

“I am working on some of those projects that have sprung back to life and I’m sure there are many others,” Bernstein said. “The city said many tens of thousands of units will be built because of this extension.”

The housing bill also included 485-x, a replacement for the 421a tax abatement that Bernstein said is causing some concerns about how useful it will be because of stricter requirements on larger projects. Construction wage requirements are among the issues with 485-x and he is hearing some projects might not pencil out.

Similarly, 467-m, an office to residential conversion program included in the 2024 state budget, is getting a lot of traction. It requires 25 percent of the units to be permanently affordable at an average of 80 percent of Area Median Income, but landlords who convert can get a 90 percent tax break on residential property taxes.

“I am representing a number of developers who have done the math and determined they want to use the 467-m program,” said Bernstein, who estimated there could be tens of millions of square feet of obsolete office space converted to housing.

Changes to Florida’s Live Local Act

In Florida, the legislature has been fine-tuning the largest housing investment in state history. Enacted in 2023, the Live Local Act incentivized development through tools like raising tax credit limits, offering property tax abatements, easing zoning regulations and banning rent control. But legislators passed amendments this year in response to some complaints that it is too pro-developer.

Amanda White, vice president of government relations and research, Florida Apartment Association, said the most controversial change has been the opt-out option that applies to the Missing Middle Exemption. The law gives developers local tax exemptions of up to 75 percent if they set aside at least 70 units in a project for affordable, middle-class housing. Some local governments complained that there was no state funding to make up for that revenue loss, among other issues, such as concerns about residential developments being allowed to be built in commercially zoned areas.

The 2024 Missing Middle Exemption change allows taxing authorities in certain counties to opt out of the exemption if there are enough affordable and available units in the area based on the latest report from the Shimberg Center for Housing Studies at the University of Florida.

“The opt-out has sort of pulled the rug out from under the Live Local Act,” White said. “It’s created an incredible amount of uncertainty.”

Seminole County, Osceola County, Pasco County, Orange County, Lake County and the cities of Orlando, Winter Park, Oviedo and Deltona are among the jurisdictions that have opted out of the Missing Middle Exemption. White said there may be misunderstanding on the part of the city and county officials who are pushing to opt out.

“So rather than have this beautiful new apartment community go up that’s going to drive values up for all the properties around it and likely improve your bottom line, you potentially are going to have some land that is vacant a little longer, because the numbers don’t work for them to build an apartment community there,” White said.

She also fears that some local governments may push for building moratoriums to stifle or stall the implementation of the Live Local Act.

For developers, the opt-out movement has prompted some lenders to pull out of financing, forcing plans to be put on hold while they wait and see if there will be more changes to the act next year. White said FAA members want them to make the Live Local Act changes, particularly the opt-out option, a priority for next year’s legislative session.