All Eyes Fixed on Federal Housing Proposals
Will cuts to HUD be counteracted by deregulation and new investment opportunities?
In recent years, private and institutional investors have entered the affordable housing sector for the stability it offers: high-occupancy and annual leveraged, cash-on-cash yields of 5 to 6 percent. That aligns well with investors seeking core and core-plus returns, according to Doug Childers, JLL senior managing director & group leader for affordable housing.
So, multifamily investors are closely watching the One Big Beautiful Bill and other federal proposals in hopes that they will yield more opportunity.
Proposed federal legislation would increase incentives and funding for affordable housing, while cutting current funding for low-income housing programs by nearly 50 percent. All told, Congressional reconciliation proposals could provide up to 1 million affordable units over the next decade—there’s 500,000 in the House bill and 1 million in the Senate’s, according to Novogradac, a consultant to the affordable housing development industry.
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A bipartisan Affordable Housing Credit Improvement Act under consideration would increase the low income housing tax credit from 9 percent to 12.5 percent, funding at least 200,000 additional units, according to the National Multifamily Housing Council. It also would make it easier to finance and build more affordable housing units, particularly in underserved areas and for specific populations like extremely low-income households and veterans.
“We are hopeful, given that the Affordable Housing Credit Improvement Act is frankly one of the most bipartisan bills that has hit Washington in a very long time and the majority of Congress has now co-sponsored it on both sides of the aisle,” noted NMHC President Sharon Wilson Geno.
The Senate bill would make the LIHTC increase permanent. It also allows LIHTCs to be used to house people earning 60 percent or more of area median income, so this could increase workforce housing production as well, noted Eric Oberdorfer, director of policy and legislative affairs at the National Association of Housing and Redevelopment Officials.
The budget reconciliation legislation also would expand Opportunity Zones to rural areas, Native American reservations and possibly a broader market area; provide relief from federal regulations that slow the development process and increase costs; open federal lands to housing development and provide underutilized federal buildings for housing conversions.
Both House and Senate reconciliation legislation would expand OZs, but the Senate version proposes making OZs permanent, according to Andy Winkler, director of housing and infrastructure projects at the Bipartisan Policy Center.
OZs have proven successful in increasing housing development in underserved or distressed neighborhoods, according to a report from The Economic Innovation Group. They provide tax breaks for investors, offer developers a new source of capital and have spurred $89 billion in investment across thousands of communities nationwide, resulting in about 313,000 housing units developed between 2019 and 2024.
Additionally, this legislation would open federal lands to housing development and possibly offer developers suitable underutilized federal buildings for conversion to housing.
There’s big acreage available in places like Nevada and Arizona, with some of it in nearby urban markets, and there’s a lot of discussion around repurposing closed post offices to be housing, noted Wilson Geno. She’s also hopeful that, if the federal government takes the lead in using government-owned property for housing production, it will set an example for state and local governments, which also own large tracts of underutilized land and buildings.
How Federal deregulation may help
While most development regulations are at the state and local levels, noted there are a number of federal regulations that add time and additional costs to projects by complicating the development process. For example, NMHC is pushing back on federal rules around energy efficiency when it is economically unfeasible.
“While all of us believe that additional energy efficiency in housing is important, if we don’t have the technology and tools, especially in high-cost environments, mandating this is just going to delay the building of needed housing,” Wilson Geno said.
Additionally, federal rules limiting resident screenings may affect the safety of communities, and other regulations make a difference in providers’ ability to cost-effectively provide housing and operate projects.
NMHC and the National Apartment Association jointly sent a letter to President Trump outlining their members’ regulatory relief priorities. The agencies mentioned span the departments of Energy, Homeland Security, HUD, Labor, OSHA, Treasury and the National Labor Relations Board as well as the EPA, FHFA and the FCC.
Pols and investors align on housing?
Less regulation would provide greater certainty for the growing number of investors who want to participate in addressing the housing shortage.
“It’s been a very long time since we’ve seen building institutional investment in multifamily housing, and we’re finally at a place now where it’s a mature, robust industry,” said Wilson Geno. “We’re at a very critical moment where we know we need more housing supply and investors are recognizing that and saying, ‘Hey, we want to invest in multifamily housing.’”
Fortunately, she noted, there is bipartisan understanding that “the problem with housing affordability in this country is housing supply,” and projections for solving the housing affordability crisis call for building an additional 4 million to 7 million units.
For this to happen, Wilson Geno advised, the sector must provide a low-risk investment environment and incentives for private players as well as a stable capital market with access to debt at a reasonable price.
HUD to take a big hit
Meanwhile, the proposed federal budget, the cornerstone of the current administration’s economic agenda, would slash funding for HUD programs by 43 percent, or roughly $27 billion to $36.2 billion, according a budget analysis by NAHRO. This includes cuts to Section 8 Housing Choice vouchers, public housing and other programs.
“The thing that most of us are keeping our eye on is the proposed cuts to the Section 8 account, which helps individuals find housing in the private market, and build (new) housing,” said Wilson Geno, noting that HUD’s project-based development subsidies enable developers to preserve new affordable units and rehabilitate existing ones.
The Section 8 account represents 82 to 83 percent of the entire HUD budget, according to NMHC. While proposed changes to the voucher program would impose a work requirement, she noted that nearly half of voucher recipients are exempt because they are elderly or disabled, and the majority of other recipients are working families with low incomes.
“But the proof would be in how those programs get implemented, and the details are important,” Wilson Geno added, noting that other move-to-work programs exempt people for various reasons like single mothers caring for small children and formerly homeless individuals or veterans.
NMHC appreciates the need for fiscal austerity, Wilson Geno emphasized, but cutting HUD programs may not be a productive solution.
“Those (HUD programs) are critical tools, and there’s a lot of costly ramifications from not continuing to provide subsidies in terms of economic impact on the elderly and disabled populations and others,” she said. “We need to be very thoughtful about being pennywise and pound-foolish when cutting housing programs.”
Budget returns burden to states
According to NAHRO’s analysis, the proposed budget calls for establishing a State Rental Assistance Block Grant to replace HUD housing assistance programs, including Tenant-based Rental Assistance, the Public Housing Operating and Capital Funds, Project-based Rental Assistance, Housing for the Elderly and Housing for Persons with Disabilities.
This would cut overall funding for rental assistance and public housing by about $27 billion, or 43 percent, to $37.2 billion, according to Oberdorfer. “This would force public housing agencies and multifamily owners to make difficult decisions in how their funding would be used,” he said.
The current’s administration’s budget also would eliminate funding sources for community development housing programs, the HOME Investment Partnerships Program, Preservation and Reinvestment Initiative for Community Enhancement and Housing Opportunities for Persons with AIDS. In addition, it reduces funding for homeless assistance by $27 million to roughly $4 billion and provides $25 million to house youths leaving foster care. But it eliminates all funding for the HUD-VASH Tribal voucher program, which provides rental assistance and supportive services to Native American veterans experiencing homelessness or at risk of homelessness.
Will Congress go along?
Winkler believes there will be cuts to HUD’s budget, but he thinks the level of proposed cuts is unlikely.
“A lot of these programs have really strong bipartisan support in Congress,” he emphasized. “And there’s a political risk to cutting back dramatically housing assistance and leaving people in a lurch,” he continued. People rely on these vouchers for a place to live, so historically Congress has renewed voucher funding to make sure nobody is displaced.
While there are 53 Republican senators and budget reconciliation only requires 51 votes to pass. Twenty Republican senate seats are up for reelection in 2026, and many of the budget cuts are popular with voters, especially those who rely on them to make ends meet.
Tariffs, deportations stoke uncertainty
While there is much to like about the proposed budget’s investment incentives, the current administration’s tariff and deportation policies continue to fuel uncertainty. Tariffs on building materials, such as steel, aluminum, drywall and lumber, for example, are estimated to increase the cost of building new apartments on average $9,200 per unit, according to the National Association of Home Builders. Tariffs, particularly on steel and aluminum, impact apartment construction more significantly than single-family homes due to the increased use of the materials in mid- and high-rise structures.
NAHB noted that skilled, undocumented immigrants comprise 30 percent of the construction workforce and warns that, if these workers are deported, it will slow new housing production and drive up costs since the construction industry is already an estimated 400,000 workers short.
