Market data · updated October 30, 2026
Two federal laws changed tax credit deals. The One Big Beautiful Bill Act raised 9% ceilings 12% for good and let 4% deals qualify with a 25% bond test instead of 50%. The ROAD to Housing Act raised bank investment capacity and opened new gap sources without amending section 42. HUD also cut the FHA multifamily premium to 25 bps. Each item below links to its primary source.
Two LIHTC changes, both in section 70422, and two related community-investment changes.
Calendar years beginning after December 31, 2025
Section 42(h)(3)(I) now multiplies both the per-capita amount and the small-state minimum by 1.12 every year, replacing the 12.5% boost that ran only for 2018 to 2021.
For 2026 that gives $3.416 per resident or a $3,953,600 minimum (Rev. Proc. 2025-32 sec. 4.08).
Source: Pub. L. 119-21 sec. 70422(a), 139 Stat. 234; Rev. Proc. 2025-32
Buildings placed in service in taxable years beginning after December 31, 2025
A bond-financed building still gets 4% credits without a ceiling allocation if 50% or more of the aggregate basis of the building and its land is financed with volume cap bonds (the old test, kept as 42(h)(4)(B)(i)).
Or, under the new 42(h)(4)(B)(ii): at least 25% of the aggregate basis of the building and land is financed by tax-exempt private activity bonds subject to the volume cap, and one or more of those bonds, from an issue dated after December 31, 2025, together finance at least 5% of that basis. It applies to buildings placed in service in taxable years beginning after December 31, 2025, and the 50% test still applies as an alternative.
For a rehab treated as a separate new building under 42(e), both the existing building and the rehab are treated as placed in service on the 42(e)(4) date.
Bonds issued before 2026 can count toward the 25%, but only if bonds from issues dated after December 31, 2025 together supply at least 5% of basis. Test your numbers with the bond test tool.
Rolling 10-year designations; first decennial determination date July 1, 2026
Governors nominate new zones every ten years from each July 1 decennial determination date, starting July 1, 2026.
An investment held at least 5 years gets a basis increase of 10% of the deferred gain, or 30% for a qualified rural opportunity fund.
For LIHTC: the credit and the OZ benefits are separate. A qualified opportunity fund can own a tax credit property and take OZ gain treatment while a credit investor takes the credits; the two must be structured together, and fund rules on substantial improvement and asset tests still apply.
Source: Pub. L. 119-21 sec. 70421
Each calendar year after 2019
The $5 billion annual NMTC allocation under section 45D(f)(1)(H) no longer expires, with carryover of unused limitation capped at five years. NMTC can fund commercial or community space in a mixed-use LIHTC deal.
Source: Pub. L. 119-21 sec. 70423
In the House-passed bill (May 2025) only
Section 70422 as enacted contains only the ceiling increase and the bond test. The provision treating rural and Indian areas as difficult development areas for a 30% boost is not law, despite some summaries that say otherwise.
Source: Pub. L. 119-21 sec. 70422 (enacted text); 26 U.S.C. 42 amendment notes
The Act does not amend section 42. These are the provisions that change money or rules in a tax credit capital stack.
On enactment
National banks and state member banks may hold public welfare investments, which include LIHTC equity, up to 20% of capital and surplus instead of 15%. This widens the main source of credit demand.
Source: Pub. L. 119-101 sec. 203 (12 U.S.C. 24 Eleventh; 12 U.S.C. 338a)
On enactment
The Rental Assistance Demonstration sunset is removed and the unit cap goes from 455,000 to 555,000, keeping RAD conversions, many financed with 4% credits, available.
Source: Pub. L. 119-101 sec. 212
Adjustments commencing July 1, 2025
The statutory per-unit dollar limits in title II of the National Housing Act are raised and now adjust each year by the Census Price Deflator Index of Multifamily Residential Units Under Construction. Watch for HUD's implementing notice before sizing a 221(d)(4) loan to the new limits.
Source: Pub. L. 119-101 sec. 211
Amounts appropriated after July 11, 2026
New construction of affordable housing becomes a CDBG-eligible activity, capped at 20% of a recipient's allocation: a new possible gap source for LIHTC deals.
Source: Pub. L. 119-101 sec. 204
On enactment
HOME is permanently authorized, the CHDO definition is relaxed, and HUD may not restrict a participating jurisdiction's choice of eligible activities. Rental income targeting is unchanged.
Source: Pub. L. 119-101 sec. 501
On enactment
The Multifamily Mortgage Foreclosure Act now covers Section 515 and 538 mortgages, and USDA must keep Section 521 rental assistance attached through foreclosure or disposition: relevant to rural LIHTC preservation deals.
Source: Pub. L. 119-101 sec. 502
On enactment
A unit in a LIHTC building that passed a physical inspection under section 42(i)(3)(B)(ii) in the prior 12 months is deemed to meet Housing Choice Voucher inspection requirements, if the PHA did or can obtain the inspection. Fewer duplicate inspections for voucher tenants.
Source: Pub. L. 119-101 sec. 405
Changes made by HUD and Treasury rather than Congress.
Applications submitted or amended on or after October 1, 2025, not yet initially endorsed
HUD set the annual MIP at 0.25% for all FHA multifamily programs, including 221(d)(4), 223(f) and 223(a)(7), and eliminated the 2016 green, affordable and broadly affordable tiers.
Source: HUD notice, 90 FR 45789 (Sept. 23, 2025), FR Doc. 2025-18379
Effective September 30, 2025
Treasury final regulations (T.D. 10036) set the recordkeeping and reporting requirements for projects that elect the average income test, building on the 2022 rules (T.D. 9967). See the income averaging tool to check a unit mix.
Applies from January 1, 2027
HUD's 2027 designations of qualified census tracts and difficult development areas, which decide where the 130% basis boost is available (for bond deals, the only boost).
Source: HUD notice, 91 FR 63573 (Oct. 6, 2026), FR Doc. 2026-20390
Proposals that are not law as of October 30, 2026. Do not underwrite to them.
Introduced in the 119th Congress
Provisions in the bill as introduced include a 50% basis boost for units for extremely low-income tenants, rural and tribal DDA treatment, clarifying the nonprofit right of first refusal, ending qualified contracts for new allocations, more time for the 10% carryover test, a simpler student rule and renaming the program the Affordable Housing Tax Credit.
FDIC and OCC proposal; comments were due October 13, 2026
A proposal to change bank size thresholds under the Community Reinvestment Act rules, which could change how much LIHTC equity banks buy for CRA credit.
Source: Reported in CohnReznick TCA Housing Tax Credit Monitor, October 2026
Run the numbers: 25% bond test, income averaging, 2026 state ceilings.
Yes. Section 70422 of Pub. L. 119-21 permanently raised 9% state ceilings by 12% from 2026 and added a 25% bond test: at least 25% of the aggregate basis of the building and land is financed by tax-exempt private activity bonds subject to the volume cap, and one or more of those bonds, from an issue dated after December 31, 2025, together finance at least 5% of that basis. It applies to buildings placed in service in taxable years beginning after December 31, 2025, and the 50% test still applies as an alternative.
A building qualifies for 4% credits without a ceiling allocation if at least 25% of the aggregate basis of the building and land is financed by tax-exempt private activity bonds subject to the volume cap, and one or more of those bonds, from an issue dated after December 31, 2025, together finance at least 5% of that basis. It applies to buildings placed in service in taxable years beginning after December 31, 2025, and the 50% test still applies as an alternative.
No. It was in the House bill but not in the enacted section 70422. It remains part of the pending Affordable Housing Credit Improvement Act.
It does not amend section 42. It raises the bank public welfare investment cap from 15% to 20%, makes RAD permanent, lets CDBG fund new affordable construction and lets LIHTC inspections satisfy voucher inspections, which all affect tax credit deals.
We arrange tax-exempt bond, construction, bridge and permanent financing for 4% and 9% deals.
