Affordable Housing Credit Improvement Act of 2025

This bill amends the Internal Revenue Code to reform and expand the low-income housing credit, now renamed the affordable housing credit, and makes related changes to tax-exempt bonds and other provisions. It increases state credit allocations, modifies tenant eligibility rules, adjusts credit eligibility and determination rules, and adds provisions for Native American and rural areas, among other changes.

TITLE I, Reform of State Allocation Formulas: Sec. 101 increases state allocations of housing credit dollar amounts by setting a per capita amount of $4.25 for 2025 and a formula for 2026, replacing previous fixed dollar amounts.

TITLE II, Reforms Relating to Tenant Eligibility: Sec. 201 allows exempt facility bonds to use an average income test. Sec. 202 codifies rules that low-income units remain treated as such if tenant income initially was 60% or less of area median income, despite later increases. Sec. 203 modifies student occupancy rules, excluding units occupied solely by full-time students under age 24, with exceptions for federally-assisted buildings. Sec. 204 provides that tenant voucher payments are not counted as rent for certain purposes in projects using the average income test. Sec. 205 requires housing credit-supported projects to prohibit lease refusals or terminations based on domestic violence-related criminal activity if the tenant is the victim. Sec. 206 clarifies that veterans are treated as a specified group under a Federal program for general public use requirements.

TITLE III, Rules Relating to Credit Eligibility and Determination: Sec. 301 allows a 25-month period (extendable by 12 months for qualified casualty losses) to reconstruct or replace property after a casualty loss without recapture. Sec. 302 modifies previous ownership rules and limits acquisition basis for buildings placed in service within the previous 10 years. Sec. 303 treats certain relocation costs as rehabilitation expenditures. Sec. 304 repeals the population cap for qualified census tracts. Sec. 305 lets housing credit agencies determine community revitalization plans based on their own criteria. Sec. 306 prohibits selection criteria from considering local approval or contributions, except as part of broader leverage considerations. Sec. 307 increases the credit for projects where 20% or more of units are designated for extremely low-income households (income at or below 30% of area median income or the poverty line). Sec. 308 increases the credit for bond-financed projects designated by a state agency, effective for bonds issued after 2025. Sec. 309 eliminates the basis reduction for the energy efficient commercial buildings deduction for affordable housing properties. Sec. 310 restricts planned foreclosures by requiring notice and allowing termination of the extended use period 61 days after foreclosure, unless the acquisition is part of an arrangement to terminate the period. Sec. 311 increases the population cap for difficult development areas from 20% to 30%. Sec. 312 adds development cost reasonableness as a selection criterion in qualified allocation plans. Sec. 313 reduces the tax-exempt bond financing requirement from 50% to 25% for buildings financed by obligations first taken into account after enactment.

TITLE IV, Reforms Relating to Native American Assistance: Sec. 401 adds the affordable housing needs of enrolled tribal members and certain Native American individuals as a selection criterion. Sec. 402 includes Indian areas as difficult development areas for certain buildings.

TITLE V, Reforms Relating to Rural Assistance: Sec. 501 includes rural areas as difficult development areas. Sec. 502 provides uniform income eligibility for rural projects, effective for taxable years after 2024.

TITLE VI, Exempt Facility Bonds: Sec. 601 revises the treatment of refunding issues for bonds used for certain projects, treating certain repayments as refunding issues within a 12-month period.

TITLE VII, Affordable Housing Tax Credit: Sec. 701 renames the low-income housing credit to the affordable housing credit throughout the Internal Revenue Code.

TITLE VIII, Data and Transparency: Sec. 801 expresses the sense of Congress that steps should be taken to share data and increase program transparency, and to discourage discriminatory land use policies.