The direction of federal affordable housing policy will take center stage in Washington, D.C., next year as new leadership prepares to tackle a crisis that impacts millions of Americans. According to a new report from Arbor Realty Trust, shifting dynamics in Congress and the Senate will play a pivotal role in federal funding for affordable housing, which is expected to peak in 2025 before gradually declining over President Donald Trump’s second term.
Arbor said the Low-Income Housing Tax Credit (LIHTC) program, which helps finance the development of affordable housing, is at a crossroads. Although LIHTC accounts for 32.1% of all federally subsidized rental units, it faces an uncertain future as fiscal hawks push to curb tax expenditures. Advocates for affordable housing fear that reductions to the program would hinder new development, especially in high-demand areas where housing costs are rising.
While LIHTC faces challenges, the Housing Choice Voucher program is also poised for attention in the coming years.
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Arbor said the latter program, which provides tenant-based assistance allowing recipients to move freely between locations, has grown steadily and could also play a pivotal role in the next administration’s approach to affordable housing. The program is popular among policymakers due to its market-driven approach and accounted for 53.7% of federally subsidized rental units in 2023. Unlike rent control, which places cost burdens on landlords, HCV operates within a competitive framework, making it a bipartisan favorite.
The incoming administration has proposed redirecting funds from other affordable housing programs to bolster HCV, potentially expanding their reach to more low-income households. This would come as a relief to renters, whose average annual household income hovers around $17,835, and to communities looking to increase economic mobility for residents. However, critics argue that relying too heavily on HCV risks sidelining efforts to create new affordable housing stock.
Housing advocates are bracing for a potential reallocation of funds as early as mid-2025. While HCVs have strong political backing, Arbor said that affordable housing shortages persist. Government programs have made progress in preserving and expanding affordable housing, but Arbor warns that the incoming administration must take action to mitigate the anticipated decline in affordable housing production after 2025.
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