Key Takeaways
- Legislation expanding the public welfare investment cap from 15% to 20% strengthens Low-Income Housing Tax Credit (LIHTC) financing capacity and supports increased affordable housing deal flow.
- Proposed reforms streamline Housing Choice Voucher inspections and modernize Federal Housing Administration (FHA) multifamily loan limits, improving development timelines and financial predictability.
- Pilot programs for pre-approved design templates and delegated environmental reviews aim to accelerate approvals, reduce soft costs and ease regulatory bottlenecks in housing production.
The House of Representatives recently passed the Housing for the 21st Century Act with overwhelming bipartisan support, marking a pivotal moment for affordable housing policy. As the House’s companion to the Senate’s Road to Housing Act, the legislation reflects broad agreement that expanding and preserving affordable housing must be a national priority.
While the two chambers must reconcile differences before sending final legislation to the President, the core provisions shared by both bills represent a substantial win for affordable housing stakeholders. The measures outlined below meaningfully address capital flow, development efficiency and regulatory friction, all of which directly impact the ability to deliver housing at scale.
Expanding Capital for LIHTC Development
One of the most impactful provisions in both bills is a notable increase in the public welfare investment (PWI) cap from 15% to 20%. For banks subject to this cap, this change creates significantly more room to invest in Low-Income Housing Tax Credit (LIHTC) projects. For LIHTC investors and developers, this is critical. Access to equity capital has been one of the primary constraints on affordable housing production. By expanding the investment capacity of financial institutions, this change would strengthen the capital stack and help drive additional deal volume in the years ahead.
Reducing Friction for Voucher-Based Housing
For owners working with Housing Choice Vouchers, both bills include proposed reforms to address one of the most persistent operational challenges: inspection delays. Under the proposed changes, units financed through LIHTC, HOME or Rural Development programs that have passed inspection within the past year would automatically satisfy Housing Choice Voucher inspection requirements. This alignment reduces duplicative oversight and helps units lease faster. In practical terms, this improves absorption timelines, reduces vacancy loss and enhances stability for both operators and residents.
Modernizing FHA Multifamily Loan Limits
Both versions of the legislation also direct the Federal Housing Administration (FHA) to recalibrate multifamily loan limits to better reflect today’s construction and market costs. The House’s bill specifically includes indexing future increases to the Price Deflator Index for Multifamily Residential Units Under Construction.
For developers utilizing FHA financing, this change brings greater predictability and ensures loan limits remain aligned with economic reality.
Given the volatility in construction pricing over the past several years, this is a necessary modernization.
Accelerating Approvals Through Design Innovation
Another forward-thinking component in both bills is the creation of a HUD pilot grant program to support “pattern books” — pre-approved design templates for missing middle and infill housing, particularly focused on rural and high-opportunity markets. Standardized, pre-approved plans can materially shorten approval timelines and reduce soft costs. For builders and developers, especially those operating in smaller municipalities with limited planning resources, this could be a meaningful step toward speeding up production and lowering overall development costs.
Streamlining Environmental Review
Both bills also look to address perceived shortfalls in the National Environmental Policy Act (NEPA). The changes include modernization to the NEPA review process by expanding HUD’s ability to delegate responsibilities to state, local and tribal governments and by increasing capacity-sharing flexibility.
Environmental review is essential — but inefficiencies can delay projects unnecessarily. By improving coordination and delegation, the legislation aims to preserve oversight while reducing bottlenecks that stall shovel-ready housing.
What This Means for Affordable Housing
Taken together, these provisions address several structural barriers to housing production: capital constraints, regulatory delays, outdated loan thresholds and duplicative compliance processes.
No single piece of legislation will solve the housing affordability crisis; however both acts reflect practical, bipartisan recognition that supply matters — and that both capital access and process efficiency are central to increasing that supply. For those of us focused on affordable housing, the message is clear: momentum is building. As these provisions move toward final reconciliation and potential enactment, stakeholders should be prepared to adapt strategies, evaluate new financing opportunities and position projects to take advantage of a more supportive regulatory environment.
This is a meaningful step forward — and one that reinforces the importance of collaboration between policymakers, capital providers and developers in meeting the housing needs of the 21st century.
We Can Help
As the Housing for the 21st Century Act advances and capital markets and regulatory frameworks shift, affordable housing sponsors, investors and financial institutions will need to reassess financing strategies, compliance processes and portfolio positioning.
The affordable housing and real estate advisory teams at PKF O’Connor Davies work with developers, LIHTC investors, banks and nonprofit sponsors to evaluate capital structuring, tax credit strategy, FHA financing alignment and regulatory compliance.
Proactive planning now can position stakeholders to fully capitalize on expanded investment capacity and streamlined development processes once final legislation is enacted.
Contact Us
If you have any questions, please contact your PKF O’Connor Davies client service team or:
Andrew M. Musci, CPA
Partner
amusci@pkfod.com | 914.421.5649
Jennifer M. Galasso, CPA
Partner
jgalasso@pkfod.com | 914.341.7067