Early Thursday morning on the basis of a tremendous push by the Republican conference, the House of Representatives passed the One Big Beautiful Bill Act (OBBB) by a 215-214 party-line vote, meeting Speaker Mike Johnson’s Memorial Day goal. The bill text is available here. The OBBB includes a number of provisions that will be very favorable for the development of affordable housing:

Section 111109 modifies the Low-Income Housing Tax Credit (LIHTC). The bill renews an increase in 9% LIHTC Allocations to 12.5% from 2025 to 2029, restoring and extending the temporary increase in credit allocations to 12.5% that had expired at the end of 2021. 

For 4% LIHTC deals, the bill lowers the private activity bond threshold from 50% to 25% for obligations made after Dec. 31, 2025, and before Jan. 1, 2030. 

The OBBB reinstates the 100% bonus depreciation for qualified property acquired and placed in service between Jan. 19, 2025, and Jan. 1, 2030, allowing businesses to immediately deduct the full cost of eligible assets in the year they are placed in service. Eligible property includes tangible property with a recovery period of 20 years or less (like machinery or equipment), qualified improvement property, and others (see section 168(k) of the IRS code for more descriptions). There are some exclusions, but for purposes of multifamily development, any tangible operating equipment with a 20-year or shorter life (like HVAC, appliances, etc.) used in residential rental properties do qualify for the 100% bonus depreciation under 168(k) as amended by the OBBB. 

The bill also expands the Opportunity Zone (OZ) program. Taxation of capital gain from the sale of property invested in a qualified OZ fund on or after Jan. 1, 2027, will be deferred until the earlier of (i) Dec. 31, 2033, or (ii) the date of disposition of such investment. Once an investor holds its interest in the OZ fund for five years, the investor will also obtain a 10% basis increase, which will ensure that only 90% of the deferred gain is taxed. The OBBB also allows for the designation of additional qualified OZs and mandates that at least 33% of OZs must be in rural areas. 

The bill expands Designated Difficult Development Areas (DDAs) designations by automatically allowing for all Indian Areas (tribal lands) and all “rural areas” to qualify as an OZ. The bill defines a “rural area” as any non-metropolitan area, or any rural area as defined by Section 520 of the Housing Act of 1949. Any “non-metropolitan area” just means anything that is not a Metropolitan Statistical Area (MSA). The 1949 Housing Act defines an area as “rural” if it is not part of, or associated with, an urban area, and:

• Has a population not in excess of 2,500 inhabitants; or
• Has inhabitants between 2,500 and 10,000, so long as it is “rural in character”; or
• Has inhabitants between 10,000 and 20,000 and:
  • (A) is not contained within a MSA; and
  • (B) “has serious lack of mortgage credit for lower and moderate-income families” (42 U.S.C. §1490)

The significance of the OBBB is that these areas automatically receive the 30% basis boost, without needing to be listed on U.S. Department of Housing and Urban Development’s (HUD) annual DDA list. HUD is in charge of designating the DDAs, where projects were previously required to be located within to be eligible for the 30% basis for tax credits.

The bill maintains the corporate tax rate at 21%, as established by the 2017 Tax Cuts and Jobs Act. Earlier discussions and proposals to reduce the rate further, evidently, were not included in the final version of the bill that passed the House.  

In the next phase of the reconciliation process, this final House bill now moves on to consideration in the Senate in June when Congress returns from its recess. Republicans have a slim 53-47 majority, but as part of reconciliation, they can pass the bill with a simple majority. Some changes to the OBBB are expected in the Senate, particularly around clean energy incentives and Medicaid, but the expectation is that the final product will be similar to what the House has produced.  

Congress plans to have legislation on President Trump’s desk for signature by the Fourth of July. The Nelson Mullins team will provide more updates as occur.