Baker Tilly, a leading advisory, tax and assurance firm, recently hosted a webinar examining the impacts of the One Big Beautiful Bill Act (OBBBA), which includes permanent changes to the Low-Income Housing Tax Credit (LIHTC) program. With adjustments such as reducing the bond financing test from 50% to 25% and increasing 9% credit allocations by 12%, public housing agencies (PHAs), developers, and investors will see new opportunities to preserve and create affordable homes.
How HAI Group and Baker Tilly’s growing collaborative relationship benefits housing professionals
As the leading insurer of public and affordable housing organizations, HAI Group reached out to Baker Tilly for deeper insights on what these changes mean for the LIHTC industry and how PHAs can prepare. You can read Baker Tilly's insights below. Through HAI Group Online Training, the two organizations have built a trusted partnership to deliver high-quality, practical training for housing professionals. This collaboration combines HAI Group’s self-paced, on-demand learning platform, designed specifically for the housing industry, with Baker Tilly’s deep expertise in housing finance, compliance, and operational best practices. Together, they’re committed to providing accessible, flexible learning opportunities that help professionals strengthen their skills, stay ahead of regulatory requirements, and support the creation and preservation of affordable housing.
View the discussion on OBBBA and LIHTC changes
Don Bernards and Garrick Gibson, principals at Baker Tilly, were joined by Sam Adams, managing director at KeyBanc Capital Markets, and Danielle Hammann, managing director for multi-investor fund operations for Enterprise Housing Credit Investments LLC, to discuss the impacts the OBBBA will have on the LIHTC industry. You can watch Baker Tilly's webinar recording on their website or by clicking the video below.
Breaking Down OBBBA: Expert insights from Baker Tilly
What are the most significant ways the One Big Beautiful Bill Act will impact the LIHTC industry overall?
The LIHTC industry should see an expansion in deal flow, especially in 4% bond deals, plus stronger 9% competition and potential investor pricing stability over time. In practical terms, OBBBA is expected to unlock more affordable units, faster, with a long-term predictable framework.
What specific opportunities or challenges should public housing agencies be aware of as they plan for these LIHTC changes?
The OBBBA creates increased opportunities for PHAs. The permanent reduction of the bond test to 25% will make RAD conversions and mixed-finance redevelopments more feasible, while the 12% increase in 9% allocations opens more room for PHA-sponsored new construction and substantial rehabs. Permanency also allows PHAs to plan multi-phase pipelines with greater confidence, and stronger investor appetite could mean better equity pricing and terms.
At the same time, PHAs will face new challenges. Competition for both 4% and 9% credits will intensify as more developers pursue deals, and states will likely revise QAPs to manage demand—requiring PHAs to advocate for preservation and deep affordability priorities. Limited staff capacity may hinder smaller agencies from capturing opportunities, and even with more bond cap available, constrained soft funding sources will remain bottlenecks for completing financing stacks.
With the 50% bond test reduced to 25%, how might the landscape for affordable housing development shift, and what should smaller and larger PHAs consider in responding to these changes?
The reduction of the bond test from 50% to 25% will unlock a wave of new 4% LIHTC developments, as states can stretch scarce bond cap across more projects. This will expand opportunities for preservation, RAD conversions, and new construction, but also heighten competition for limited soft funding. Smaller PHAs should focus on partnerships and leveraging land or RAD opportunities to stay competitive, while larger PHAs can plan multi-phase pipelines and advocate for favorable QAP changes. Both must prepare for a busier market where soft funds, not bonds, become the key bottleneck.
How might these changes influence the affordability of units within new developments for low-income families?
OBBBA is expected to increase the supply of affordable units and may support deeper affordability, particularly if states direct new credit authority toward extremely low-income households and preservation. The true impact, however, will hinge on how each state revises its QAP and allocates these expanded resources.
How can PHAs start preparing now to take advantage of the expanded 4% and 9% credit capacity coming in 2026?
PHAs should prepare now by expanding their development pipelines and identifying properties suited for 4% and 9% LIHTC deals, particularly RAD conversions and large redevelopments. Building partnerships with experienced developers and securing soft funds and state trust funds will be essential, as these resources remain limited. PHAs should also engage state housing finance agencies during QAP updates to advocate for preservation, deep affordability, and PHA-led priorities, positioning themselves to take full advantage of expanded credit authority in 2026.
Do you anticipate that smaller or less-resourced PHAs will face barriers to accessing these new opportunities? If so, how can they overcome them?
Yes—smaller PHAs will face barriers such as limited staff, less development expertise, and difficulty assembling complex financing compared to larger agencies and private developers. They can overcome these challenges by partnering with experienced developers, leveraging technical assistance from state HFAs and HUD, pooling resources regionally, and focusing on opportunities like RAD conversions or land contributions that play to their strengths.
How important is collaboration between PHAs, developers, and financing partners in ensuring the success of these changes?
Collaboration between PHAs, developers, and financing partners is essential to fully realize the benefits of OBBBA. Each brings critical expertise and resources, and aligning these strengths will be key to turning expanded credit capacity into successful affordable housing projects.
What role do you see state and local governments playing in facilitating the changes introduced by the One Big Beautiful Bill Act?
State and local governments will be central to implementing the OBBBA changes. State housing finance agencies must revise their QAPs to allocate the expanded 9% credit authority and manage the increased flow of 4% bond-financed projects under the 25% test. Local governments will play a key role in providing zoning approvals, permitting, and scarce soft funds that remain critical to closing financing gaps. Together, state and local actions will determine whether the new credit resources translate into deeper affordability, preservation, and expanded housing supply for low-income families.
Can you speak to any long-term trends or shifts in affordable housing development that you expect to see as a result of these changes?
Over time, OBBBA will drive a surge in 4% bond-financed deals, especially for preservation and RAD conversions, while expanded 9% allocations will support deeper affordability. The permanency of these changes will let developers and PHAs plan larger, multi-phase pipelines and reposition portfolios more strategically. However, competition for scarce soft funds will intensify, reinforcing the need for layered financing and strong public-private partnerships. Overall, the industry is likely to see higher production, deeper income targeting, and more collaborative delivery models in the decade ahead.
How do you see the relationship between LIHTC and other housing programs evolving under the One Big Beautiful Bill Act?
OBBBA strengthens LIHTC as the backbone of affordable housing finance, but it also increases reliance on programs like HOME, CDBG, RAD, and Section 8 to fill funding gaps and achieve deeper affordability. LIHTC will anchor most developments, while other federal, state, and local resources will be essential partners in making projects feasible.
What new skills or expertise should housing professionals be focused on developing to navigate these upcoming changes effectively?
To navigate the changes from OBBBA, housing professionals will need to strengthen several key skills. First, expertise in layered financing will be critical, since more projects will pursue limited soft funds alongside the expanded LIHTC capacity. Professionals should also develop stronger partnership and negotiation skills to structure joint ventures with developers, PHAs, and investors. As deal volume grows, asset management and compliance capabilities will be increasingly important to ensure long-term program performance. In addition, professionals will benefit from building policy and advocacy skills to influence how states adjust their QAPs and allocate new credits. Finally, the ability to manage multi-phase redevelopment pipelines will become a valuable strategic skill as larger projects move forward under the new rules.
Bottom line
The One Big Beautiful Bill Act brings meaningful, long-term changes to the LIHTC program that could shape affordable housing development for years. Understanding how these adjustments may influence financing, competition, and planning can benefit public housing agencies and their partners.
For additional insights on the LIHTC program, check out our blog on the Fundamentals of the LIHTC Program, the first course in a series offered through HAI Group Online Training in collaboration with Baker Tilly.
Ready to begin learning how your agency can take advantage of the LIHTC program? Be sure to start the Fundamentals of the LIHTC Program course today.
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