How the Affordable Housing Credit Improvement Act of 2025 Impacts Multifamily Investing

In June 2025, the U.S. Congress passed the Affordable Housing Credit Improvement Act of 2025—a bipartisan bill that seeks to expand access to affordable rental housing by strengthening and modernizing the Low-Income Housing Tax Credit (LIHTC) program. This legislation is expected to bring significant change to the multifamily real estate landscape and provide new opportunities for developers, sponsors, and investors focused on mission-aligned housing solutions.

What Is the Low-Income Housing Tax Credit (LIHTC)?

The LIHTC program is the largest federal initiative supporting the construction and rehabilitation of affordable rental housing. Created in 1986, it offers tax credits to developers that build or preserve affordable housing units for low-income tenants. Investors purchase these credits, providing equity to developers and reducing their overall tax liability in return.

Key Provisions in the 2025 Legislation

The new Affordable Housing Credit Improvement Act brings several enhancements to the existing LIHTC framework. These include:

Increase in Annual Credit Allocation: The bill raises the annual LIHTC allocation by 50% over two years, significantly increasing the funding pool for affordable housing projects.
Permanent 4% Credit Floor: A permanent floor for 4% LIHTCs helps ensure predictability for developers using tax-exempt bond financing.
Deeper Affordability Incentives: The bill adds additional incentives for developments that serve extremely low-income households and preserve existing affordable units.
Expanded Geographic Access: Rural and underserved markets will benefit from a more flexible area median income (AMI) structure and targeted support.

Implications for Multifamily Real Estate Investors

For investors in the multifamily space, this bill creates new pathways to participate in affordable housing development while realizing long-term, stable returns. LIHTC-backed properties are known for their low vacancy rates and strong demand, making them a valuable addition to a diversified portfolio.

With more credits available, sponsors may find it easier to assemble the capital stack for affordable housing projects. Investors seeking tax-advantaged equity placements—particularly in high-tax states—will find these opportunities especially appealing. Additionally, projects financed through LIHTC typically benefit from government incentives, such as low-cost debt, local zoning support, and streamlined approval processes.

New Opportunities for Sponsors and Developers

Developers and syndicators in the multifamily sector will need to adapt to take full advantage of the new credit allocation. This includes aligning with nonprofit partners, targeting high-impact regions, and structuring projects to meet deeper affordability requirements. Projects that combine LIHTC financing with other federal programs such as HOME, CDBG, or HUD Section 8 can unlock additional leverage and social impact.

Social Impact + Financial Returns

Affordable housing has become a core component of ESG (Environmental, Social, Governance) strategies for both institutional and individual investors. The 2025 legislation enables multifamily sponsors to offer investors both measurable social outcomes and consistent returns—often backed by predictable government-supported income streams.

Conclusion

The Affordable Housing Credit Improvement Act of 2025 represents a major step forward in addressing the nation’s housing crisis—and multifamily investors are in a strong position to lead this transformation. By participating in LIHTC-backed developments, you can help close the affordability gap while securing stable, long-term returns.

Interested in multifamily projects that align with the new legislation?
Contact us to learn more about our pipeline of affordable housing investment opportunities.