Housing Credit Expansion Offers Hope, But Federal Cuts Threaten Gains

July 8, 2025 | New York City

In a significant development for affordable housing advocates, a major policy bill signed into law last Friday includes long-sought reforms to the federal low-income housing tax credit program. The changes permanently boost annual allocations of 9% credits and reduce bond financing thresholds for 4% credits, making it easier for developers to finance affordable housing. Analysts say the move could help build over one million rental units nationwide over the next decade, with 73,500 units projected in New York alone.

However, the gains are overshadowed by looming threats of deep federal budget cuts. President Trump has proposed slashing the Department of Housing and Urban Development’s (HUD) budget by $33 billion—42%—including a $26 billion cut to rental assistance and a proposed restructuring of the Section 8 program into a limited grant system. If enacted, New York could lose nearly half of its federal housing funding, or about $4.4 billion, according to the New York Housing Conference.

As cities brace for the impact, leaders are also contending with reductions in Medicaid and food assistance. Governor Kathy Hochul estimates that 1.5 million New Yorkers may lose healthcare coverage due to the broader spending cuts included in the bill. While the housing credit expansion is a major win for the industry, experts warn that it may not be enough to offset the damage caused by sweeping budget reductions.

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