This explainer has been updated to reflect the House of Representatives’ passage of H.R. 1, the One Big Beautiful Bill Act
On May 22, the House passed H.R. 1, the One Big Beautiful Bill Act, which includes provisions that, if enacted, could affect housing supply, preservation, and affordability—focus areas for BPC’s J. Ronald Terwilliger Center for Housing Policy.
The titles of the reconciliation bill marked up by the House Financial Services Committee and House Ways and Means Committee, in particular, included legislative proposals most directly related to housing. Overall, the reconciliation bill aims to extend and expand expiring tax provisions from the Tax Cuts and Jobs Act (TCJA) of 2017, while also advancing a wide range of administration priorities.
While the reconciliation bill’s impact on the deficit has not yet been determined, the Joint Committee on Taxation and the Congressional Budget Office have estimated the budgetary effects of many proposed provisions over the 2025-2034 budget window, which are noted below where available.
Provisions from the House Financial Services Committee
Eliminates the Green and Resilient Retrofit Program (GRRP) (§50001)
- Rescinds GRPP’s unobligated balances. (+$138M)
- The Inflation Reduction Act of 2022 previously provided $1 billion to the Department of Housing and Urban Development (HUD) for GRRP to fund energy and water efficiency retrofits and climate resilience projects at HUD-assisted multifamily properties.
Limits the Consumer Financial Protection Bureau (CFPB) (§50003 and 50004)
- Decreases the maximum amount that the CFPB can request from the Federal Reserve to cover operating expenses from 12% to 5%, reducing the agency’s spending on administrative activities. (+$4B)
- Prohibits the CFPB from spending its Civil Penalty Fund for any purpose other than to pay victims of violations of consumer financial law for which the penalties have been imposed. (+$9M)
Provisions from the House Ways and Means Committee
Expands the Low-Income Housing Tax Credit (§111109) (-$14B)
- Restores and extends a temporary 12.5% increase in credit allocations that expired at the end of 2021 for 2025-2029.
- Lowers the Private Activity Bond (PAB) financing threshold, commonly known as the “50% test,” from 50% to 25% for 2025-2029. This test requires that PABs finance at least 50% of the aggregate basis of land and building costs of affordable housing properties to qualify for the maximum amount of 4% LIHTCs.
- Provides a 30% basis boost for properties in rural and Native American areas.
- Treats rehabilitation expenditures as a new property as of its placed-in-service date beginning in 2026
The changes above would finance the construction and preservation of an over 2026-2035. Note: Numbers have been updated from a previous version of this explainer to reflect a more recent estimate of their impact.
Extends Limits on the Mortgage Interest Deduction (§110008) (+$6B*)
- Makes permanent TCJA provisions limiting the deduction on mortgage interest to the first $750,000 of mortgage debt, down from $1 million before TCJA, and excluding interest on home equity loans.
- Other provisions in the Ways and Means Committee’s proposal—like the extension of the TCJA’s increased standard deduction and a new limitation on the tax benefit of itemized deductions—may also limit the number of filers claiming the mortgage interest deduction.
* Note: The Joint Committee on Taxation also included the extension of limitations on casualty loss deduction and the termination of miscellaneous itemized deductions in this estimate.
Updates and Extends Opportunity Zones (OZs) (§111102 and 111103) (-$5B)
- Allows for the designation of additional qualified OZs under a modified definition of low-income community and modifies related investment incentives.
- Extends the initial designation period to 2028 and adds another OZ designation period through 2033.
- Defines a low-income community as a census tract with (1) a poverty rate of at least 20%, or (2) median family income less than 70% (down from 80%) of the greater of metro area median family income or statewide median family income.
- Supports the designation of additional qualified OZs in entirely rural areas.
- Updates the timing of tax benefits and recognition of deferred gains from 2026 through 2033.
- Requires additional reporting from qualified opportunity funds, qualified rural opportunity funds, qualified OZ businesses, and qualified rural OZ businesses, while imposing penalties for noncompliance.
- Requires the Treasury Department to publicly report data on qualified opportunity funds and rural opportunity funds.
Eliminates Housing-Related Energy Efficiency Tax Credits (§112005, 112006, and 112007)
- Eliminates 25C, the Energy Efficient Home Improvement Tax Credit (+$21B); 25D, the Residential Clean Energy Credit (+$77B); and 45L, the New Energy Efficient Home Credit (+$6B), among other clean energy tax incentives, after 2025.
- These tax credits incentivize homeowners and, in the case of 45L, eligible contractors—builders or developers—to make energy-efficient upgrades to existing homes, invest in renewable energy systems for homes, and construct or substantially rebuild new energy-efficient homes.
- The Inflation Reduction Act of 2022 significantly expanded and extended the Section 25C, 25D, and 45L tax credits; both 25C and 45L were set to expire after 2021 and 25D was scheduled to be reduced in 2022 and 2023 before expiring after 2023. All three credits were initially created in the Energy Policy Act of 2005, signed into law by President George W. Bush.
Provides for State and Local Tax (SALT) Deduction Relief (§112018)
- Extends a cap on the state and local tax deduction (SALT), starting in 2025 the cap is increased from $10,000 to $40,000 ($20,000 for married filing separately) with a new phase-out above $500,000 income at a 30% rate. Both the cap and phase-out will increase by 1% each year. (+$915B) (Previous version of the bill featured a $30,000 cap that phased down above $200,000 in income for single filers (and $400,000 for married couples.)
- The SALT deduction affects housing and housing markets beyond simply reducing costs for homeowners, who can deduct their property taxes. For example, research has shown that the cap enacted by the TCJA shifted some housing demand away from high-SALT areas, reducing average annual home price growth in those areas, with a disproportionate impact on the most expensive homes.
What Provisions Are Absent?
The bill does not include several new and existing tax provisions considered by lawmakers, which would directly or indirectly support the development and preservation of affordable homes. These include:
Looking Ahead
Of all the housing-related provisions outlined above, the proposed provisions to modify LIHTC are likely to have the most significant impact on housing production and preservation. While being advanced through a partisan reconciliation process, the LIHTC provisions have a long history of bipartisan support, align with BPC recommendations, and largely mirror those in the bipartisan, bicameral Affordable Housing Credit Improvement Act of 2025 (H.R. 2725/S. 1515), which includes additional measures to strengthen and expand LIHTC such as a 50% increase in annual Housing Credit allocation authority.
The reconciliation process is far from over. BPC will continue to monitor developments and assess their potential impact on housing policy, markets, and affordability.
Read our comprehensive Ways and Means Committee breakdown here.
