Increase Affordable Housing Supply

Navigation: Increase the Project-Based Voucher Cap | Invest in the HOME Program | Improve and Increase the Low-Income Housing Tax Credit Program

Updated July 10, 2025

Increase the Project-Based Voucher Cap 

In light of tight rental markets, PHAs are relying more on Project-based Vouchers to help ensure that units are available for families that receive a voucher. The HCV program can be used to attach a subsidy to a unit through the award of a Project-based Vouchers (PBV). This feature is important because in areas where there are not many available units, a PHA can project-base vouchers to expand the housing supply and/ or provide targeted housing and services to special needs populations. Additionally, by project-basing in areas of opportunity, a PHA can help deconcentrate areas of poverty and expand the range of jobs and services available to residents of those units.  

PHAs are only allowed to project-base 20% of their unit allocation. In certain instances, where units are serving special populations or in certain census tracts with low poverty rates, the percentage limitation may be increased by 10%. Many PHAs, especially in places like California, are slowly reaching their 20% project-based cap. As PHAs hit their cap it will become increasingly difficult for agencies to help residents find units once they move off of the wait list and go into the private market to find an available unit for the program. 

Recommendation: Increase the project-based voucher portfolio cap to 50 percent. In areas where vouchers are difficult to use or where units are not available, project-basing vouchers allows PHAs to create new affordable housing. This will enable PHAs to efficiently use their scarce federal funding and ensures that this voucher funding will be used. While PHAs may not be at the current cap levels nationally, there are many areas in the country, where they are limited by their current caps and require the ability to project-base additional units. 

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Invest in the HOME Program 

The HOME Investment Partnerships (HOME) program provides funds to states and localities to create and improve affordable housing projects for low- and very low-income households. Uses of the funds by participating jurisdictions may vary from the rehabilitation of owner-occupied housing to providing assistance to home buyers, acquiring, rehabilitating, or constructing rental housing, or providing tenant-based rental assistance. A major component of the program focuses on targeting income groups, specifically those who are defined as households with annual incomes at or below 80% of area median income (AMI). For rental housing and tenant-based rental assistance, income restrictions are at or below 60% of AMI for 90% of occupants within a given project. These restrictions are meant to boost the supply of housing for individuals within these income levels who struggle to find adequate housing. 

The HOME program plays a vitally important role in financing the development and preservation of affordable housing – a need more critical than ever. Today, our country is in an unprecedented housing supply crisis with every state experiencing shortages in affordable rental housing. This has led to real consequences including an affordability crisis for renters and homeowners, housing cost burdens, skyrocketing costs, and growing rates of homelessness– putting the American Dream further out of reach for families nationwide.   

Despite its importance, HOME has faced significant cuts. Between fiscal years 2010 through 2015, HOME was cut from $1.8 billion to $900 million. While its budget has slowly risen since then, it was cut again in fiscal year 2024 by $250 million. 

Recommendation: The HOME Investment Partnership Program plays a critical role in financing affordable housing construction. Continued support from Congress and increased funding allocations are needed to help develop additional affordable housing units.  

Additionally, aligning HOME regulations with other HUD programs would allow agencies to be able to use HOME for coordinated entry for permanent supportive housing. Coordinated entry is an extremely important system/process to fill vacancies in permanent supportive housing, which is designated for homeless and chronically homeless individuals and families. Currently, HOME and the Project-Based Voucher (PBV) program have conflicting regulations that prohibit coordinated entry for the use of permanent supportive housing.  

Recommendation: HOME regulations should be aligned with other programs like the PBV and Continuum of Care program in order to promote and develop permanent supportive housing. NAHRO suggests that Congress include statutory language in the next fiscal year provisions to incorporate this alignment. 

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Improve and Increase the Low-Income Housing Tax Credit Program 

The Low-Income Housing Tax Credit (Housing Credit) is one of the United States’ most successful tools for encouraging private investment in the creation and preservation of affordable rental housing. The Housing Credit is administered by the Department of the Treasury (Treasury) and is not a direct subsidy but rather a tax credit that can be used to offset a tax liability. In 2020, the Joint Committee on Taxation estimated $11.6 billion in foregone tax revenues due to Housing Credit allocations for 2024. As of 2022, there were 53,032 Housing Credit projects with a total of 3.65 million units.   Of these projects, 61% were new construction, 37% were rehabilitated projects, and 2% were both. This division of construction type remained consistent over the past year. 

Owners or developers of projects receiving the Housing Credit must meet specific tenant income requirements and a gross rent test to ensure the developments serve low- to moderate-income households. There are two types of Housing Credit: the 4% Housing Credit and the 9% Housing Credit. According to HUD data, as of 2022, 33% of Housing Credit properties utilized the 4% tax credit, 55% utilized the 9% tax credit, and 9% utilized both. Private activity bonds are a necessary component to development and rehabilitation using the 4% Tax Credit. Rental developments that receive at least fifty percent of financing through private activity bonds automatically qualify for the 4% Tax Credit if at least forty percent of the units are rented at an affordable rate to families making sixty percent of the area median income (AMI) or 20 percent of the units are rented at an affordable rate to families making fifty percent or less of AMI. 

Multifamily housing construction and rehabilitation has accounted for a larger share of the national bond cap over the past decade. This aligns with the increasing demand for affordable housing across the country. According to HUD’s 2019 report to Congress, there were 7.7 million households with worst case housing needs throughout the country.  Worst case housing needs include households that: pay more than one-half of their income for rent, live in severely inadequate conditions, or both. Harvard’s 2020 State of the Nation’s Housing report notes that there are only 57 affordable and available units for every 100 extremely low-income renters. Although private activity bonds are available for an array of uses, the affordable housing crisis is one of our nation’s most pressing concerns and the increased need for affordable multifamily construction private activity bonds is pushing demand past the volume cap in many states. Currently, the supply of private activities bonds simply does not meet the affordable housing demand.   

Recommendation: Exempt affordable housing from the bond volume cap as the 4% Tax Credit coupled with private activity bonds increases the equity of the bond cap.  

Recommendation: Allow state-to-state redistribution of bond volume cap if states do not meet their cap and have unused volume cap via a national pool. A national pool of unused private activity bonds would provide states that have met their volume cap access to additional bonds. 

The LIHTC program mandates that developers maintain affordability for 30 years, typically divided into a 15-year compliance period followed by a 15-year extended-use period. However, the Qualified Contract loophole allows developers to terminate affordability requirements after just 15 years, rather than the full 30 years intended by the program. This loophole has resulted in a significant loss of affordable housing and inefficient use of federal resources, with research estimating that over 100,000 LIHTC units have been lost to the Qualified Contract loophole since 1990. 

Recommendation: HUD should work with Congress to close the Qualified Contract loophole by repealing the Qualified Contract Option in Section 42 of the Internal Revenue Code to ensure LIHTC units remain affordable for the full 30-year compliance period. 

Currently, several proposals exist to improve the Housing Credit. The Affordable Housing Credit Improvement Act (S. 1557 and H.R. 3238), a bipartisan proposal introduced in the past four congresses, would critically increase the per capita amount of the credit and its ceiling. The bill would do this by increasing housing credit allocations by 50% over current levels and lowering the threshold of Private Activity Bond financing from 50% to 25%, which would greatly increase the financial feasibility of the 4% credit. The bill would also increase the credit for certain projects designated to serve extremely low-income households, and increase the population cap for difficult development areas, including areas with high construction, land, and utility costs relative to area median gross income. Lastly, the bill would simplify and align existing tax credit rules. 

Recommendation: Immediately work with Congress to reintroduce and pass the Affordable Housing Credit Improvement Act.  

Previously, the Biden Administration included significant funding boosts to the Housing Credit in their past budgets. This included a request of $37 billion to boost supply for renters in its FY 25 budget. Increasing the availability of the Housing Credit would spur new construction of affordable units in areas that may currently have oversubscribed their credit allocations. 

Recommendation: Expand the Housing Credit by requesting additional funding in budget requests.  

Lastly, an exemption on tax credit lease-up for existing public housing residents would also be advantageous. It would ensure that residents of public housing developments preserved using LIHTC remain eligible for the unit, even if they no longer meet the typical eligibility criteria after the property is preserved through LIHTC. This measure would protect all residents from losing their homes when their development is preserved through the LIHTC program. 

Recommendation: Exempt tax credit lease-up for existing public housing residents when their units are preserved through LIHTC. 

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