Today, ACTION celebrates a major milestone as the Housing Credit turns 40! The Housing Credit was signed into law on October 22, 1986. In the four decades since its inception, the Housing Credit has financed the creation or preservation of around 4.28 million affordable rental homes in communities of all sizes across the country. It has become the most impactful federal program we have for financing affordable rental housing. These homes have provided decent, safe, and affordable roofs over the heads of 9.97 million low-income families and individuals, including seniors, veterans, people who were previously homeless, people with disabilities, and people recovering from substance use disorders. From high-rise buildings and townhomes in urban areas, to garden apartments in the suburbs, to single-family rental subdivisions in rural areas and on Tribal lands, the Housing Credit enables the production of the homes that low-income Americans need. Housing Credit properties are regularly designed to blend in with the community, allowing neighborhoods to meet resident needs while maintaining their character and style.
Why is the Housing Credit necessary? America is experiencing an affordable housing crisis. Recent research indicates that there is a shortage of approximately 7.2 million rental units that are available and affordable to renters with extremely low incomes. Other recent research shows that, as of 2024, 22.7 million (or 49 percent of) renter households were cost-burdened, meaning they pay more than 30 percent of their income on rent, a number that has been increasing in recent years. Similarly, 12.1 million renter households (or 26 percent) are considered severely cost-burdened, meaning they spend over half their income on rent.
These housing cost burdens leave households with too little money left over each month, after paying rent, for other necessities such as food, healthcare, transportation, and the like. At current rates, a developer who wants to build an affordable apartment without a subsidy like the Housing Credit would have to reduce their costs by around 80 percent, a mathematically impossible feat. While other federal affordable housing programs like those run by HUD, the USDA, and other agencies — both on the supply and on the demand side — are critically important, they are simply insufficient to address the affordable housing shortage. The Housing Credit has proven, over its 40-year existence, to be the most powerful program to ensure that affordable rental housing gets built.
Affordable housing financed by the Housing Credit provides economic benefits for residents. Recent research has found that rents in Housing Credit properties are around 38 percent lower than in similar market-rate apartments, meaning that households living in Housing Credit properties save, on average, about $7,800 per year on rent compared to families living in market-rate units. Time and again, studies show that the Housing Credit not only provides affordable homes for the residents it serves, but also allows those residents the economic security they need to attain and keep employment and achieve financial stability. Residents are not only more likely to stay employed, they are more likely to get promoted, further enhancing their long-term financial security. With a safe and secure place to live, their children are able to more reliably attend school, be more attentive in class, and earn better grades, putting them on the path towards lifelong success. The financial security provided to these children’s parents can also enable their parents to help them with their homework, further helping them achieve academic, career, and lifelong success.
The Housing Credit also nurtures health benefits for its residents. In addition to having more money left over each month for necessities like medicines and medical appointments, affordable housing also enables residents to afford more food and achieve a balanced diet. The financial security that the Housing Credit provides residents has long been linked to reduced stress, which leads to better physical and mental health.
Greater ratios of Housing Credit units within states’ populations are associated with fewer non-fatal opioid overdose visits to emergency rooms; lower rates of child maltreatment, neglect, and physical abuse; fewer non-fatal intimate partner violence emergency room visits; and lower rates of intimate partner violence-related homicides; among other benefits. The presence of Housing Credit properties in neighborhoods has been associated with lower rates of elevated blood pressure among both residents and neighbors who don’t even live in these properties — an incredible positive spillover effect. These outcomes can save hundreds of millions of dollars per year in healthcare-related costs, while further boosting economic output resulting from a healthier population.
The Housing Credit provides a variety of benefits for older adults. The Housing Credit allows seniors — who are often on a fixed or limited income — to age in place affordably and with dignity, enabling them to remain in their community as they grow older. Each year, the Housing Credit is used to finance many senior communities, which often provide age-appropriate social activities, programs, and medical services; and assisted living facilities, enabling seniors who need more help and intensive medical services to affordably live and receive treatment, which can result in a more efficient use of Medicare and Medicaid funds.
Many Housing Credit properties deliver more than just affordable housing for those who need it, since they often provide or coordinate services for their residents. These services may include academic tutoring, job training, financial literacy training, asset-building resources, physical and mental healthcare, resources for single mothers and youth exiting the foster care system, and much more. Other services might include a variety of social activities, such as movie nights, game nights, and holiday parties, which help increase community bonding. Sometimes, they might provide transportation into the neighborhood for fun trips like to a restaurant, the movie theater, or the shopping mall, or for more serious appointments like a to doctor’s office, the pharmacy, the grocery store, or the bank.
The Housing Credit is also an economic engine in its own right. It has boosted the economy by supporting 7.2 million jobs per year; and it has cumulatively generated almost $815 billion in wages and business income and more than $293 billion in federal, state, and local tax and fee revenue. Research even indicates that the presence of Housing Credit properties increases the sale price of nearby single-family homes and helps moderate market-rate rent increases broadly across neighborhoods, again providing benefits not just to Housing Credit residents, but also to their neighbors.
The Housing Credit has long enjoyed unusual support in Congress. Members of Congress from both parties have long recognized the many positive attributes of the Housing Credit. The program has won the support of Senators and Representatives from across the ideological spectrum, from conservative stalwarts and Freedom Caucus members to staunch progressives, and everyone in between.
The Affordable Housing Credit Improvement Act (AHCIA) — the comprehensive legislation seeking to expand and strengthen the program — has notched significant victories since it was first introduced over a decade ago. Thanks to the AHCIA and its champions in Congress, we now have more Credit authority, a lower bond-financing threshold, the stability that comes with minimum Credit rates for both the 9 Percent and 4 Percent programs, an average income test helping to facilitate production for the poorest families, and the policy infrastructure in place allowing the Housing Credit to benefit from renewable energy. In the last Congress, the AHCIA earned support from nearly 60 percent of Congress, including members of leadership of both parties and in both chambers. Last Congress, the House version was the most-cosponsored tax bill.
What drives this continuous bipartisan support? The Housing Credit program has qualities that are attractive to both sides of the aisle. Through this essential program, we are able to increase supply and serve many of America’s neediest households as well as supporting working families, but since it’s a tax credit, it facilitates private sector investment in affordable housing rather than requiring direct federal spending. Most importantly, the Credit is a model public-private partnership with a pay-for-success model: the private sector, not the taxpayer, takes the upfront development risk, as tax credits can only be claimed once a property is built and occupied by eligible low-income people. The Housing Credit also provides states with significant flexibility to tailor the program’s implementation to their unique needs, rather than imposing a one-size-fits-all approach. What works well in Indiana might not work well in California, and vice versa. Housing Credit properties must be affordable for 30 years — often longer — providing long-term stability for residents. The Housing Credit provides equally robust methods for building brand-new affordable housing and for preserving and rehabilitating existing housing.
The program benefits from robust oversight and due diligence. The state agencies that administer the program do so efficiently, awarding only enough Housing Credits to ensure financial feasibility without over-subsidization. The private sector participants are strongly incentivized to ensure compliance with all program requirements in order to avoid a recapture event where the IRS revokes the tax credits. The program’s rigorous guardrails and oversight mechanisms are key to its success and longevity. Since the program’s inception four decades ago, less than one half of one percent of Housing Credit properties have experienced foreclosure, with none reported in recent years, making the Housing Credit one of the best classes of real estate in this regard. It is simultaneously pro-people and pro-business.
The Housing Credit’s 40-year track record of delivering quality affordable housing to low-income residents has earned it the support of every major housing advocacy group in Washington. As a grassroots coalition, the ACTION Campaign boasts more than 2,400 member organizations across the country, including tiny neighborhood community groups, local nonprofits, tenant advocates, fair housing groups, religious groups, healthcare organizations, developers, architecture firms, accounting firms, law firms, and well-established financial institutions. Every recommendation that ACTION makes to Congress and federal agencies is the result of a unanimous agreement of ACTION’s Steering Committee, which is a representative sample of the coalition’s general membership. Therefore, what ACTION recommends should be able to achieve bipartisan buy-in from Congress.
With 40 years of success behind it, what’s next for the Housing Credit? Affordable housing advocates continue to urge Congress to pass the remaining provisions in the AHCIA. Some of these provisions are financing provisions that will result in more Housing Credit resources, others are commonsense programmatic improvement provisions that will reduce administrative friction, increase efficiency, and make the Housing Credit better for residents, developers, and government agencies. ACTION is also working with our champions in Congress on provisions for future iterations of the AHCIA that could increase investor participation in the Housing Credit and make additional administrative improvements. The goal of the AHCIA is to make the Housing Credit even better than it already is for serving extremely low-income households, veterans, seniors, rural communities, Native American tribes, and people with disabilities. ACTION is dedicated to ensuring the continued success of the Housing Credit for the next four decades — and beyond. Join ACTION today to learn how you can help advocate for the next generation of the Housing Credit’s success.
