The Trump administration’s new budget reconciliation law includes modest housing investments, but its sweeping cuts to health care, food aid, and climate programs will ultimately undercut housing affordability for renters and homeowners alike. The tax law—formerly called “One Big Beautiful Bill” before that name was struck from the official title—signed by Trump on July 4 provides a small boost to the Low Income Housing Tax Credit (LIHTC) and establishes permanent funding for the controversial Opportunity Zones program.
LIHTC is the main source of affordable housing financing in the United States, but the tax credit program has long been criticized for being overly complicated and inefficient. The Opportunity Zone program, introduced during the first Trump administration, is meant to increase investment in low-income census tracts. Critics say it has instead enriched private equity by spurring investments that would have happened anyway.
The tax law also carries historic and devastating cuts to the country’s social programs. Medicaid and Medicare will see cuts of $1 trillion and $490 billion, respectively, over the next decade. The law is estimated to increase the number of uninsured people by 10.9 million. Cuts to food assistance will cause 22.3 million families to lose benefits, according to the Urban Institute.
“I think there are a lot of people saying there are housing wins in the reconciliation package, but I just see an attack on people experiencing poverty,” says Noëlle Porter, director of government affairs at the National Housing Law Project.
The tax law has dire implications for renters and homeowners, largely because millions of American renters rely on the country’s major social safety health programs, but also because cuts to climate tax credits will result in raised utility bills.
But the most serious attacks to the housing and homelessness sectors are still being discussed as part of the recently introduced Transportation, Housing and Urban Development Appropriations bill. The bill could kick hundreds of thousands of low-income Americans off vouchers and functionally end fair housing enforcement.
“The Rent Eats First”
Trump’s tax law provides a long-requested boost to the Low Income Housing Tax Credit, which has long been dramatically underfunded compared to the need. Last year, it cost the government $14.4 billion, a drop in the bucket of a budget that has surpassed $6 trillion for several years in a row.
The new law increases states’ LIHTC allocations by 12 percent; the increased funds were welcomed by developers and landlord lobbyists.
The National Apartment Association says the law will “help boost long-term affordability, increase supply and protect the nation’s rental housing infrastructure.” The trade group, which organized hundreds of meetings between industry representatives and congressional staff, says the law will “enhance and improve” the LIHTC program.
LIHTC, which requires that developers temporarily make rental units affordable for at least 15 years, is the main source of funding for the construction of affordable housing in the United States. But it has long frustrated advocates who decry its convoluted structure, its time-consuming requirement for developers to access outside financing, and its nature as a speculative asset sold to large corporations to cut tax liabilities.
Porter, from the National Housing Law Project, says that the LIHTC program does not have the same protections as other affordable housing programs like the ones administered by HUD.
“We would support expansion of this program, but it is time to place guardrails and tenant protections on how LIHTC credits are applied,” Porter says. For instance, she points out that the IRS, which administers the program, does not provide the same protections for survivors of domestic violence in LIHTC housing that tenants in HUD-administered programs receive.
The National Housing Law Project has also criticized the program for not providing deep enough affordability. “We know the biggest need is in the lowest income housing. And really that’s not what LIHTC typically builds,” Porter says. Affordability in the program is based on area median income. An influx of wealthy residents can cause rents in LIHTC apartments to gradually increase.
But the main crisis for tenants under the new law are cuts to government assistance.
By shredding SNAP, Social Security, Medicare, and Medicaid through a combination of work requirements, blanket cuts, and adding so much debt to the budget it triggers automatic cuts, Republicans have created additional income burdens for most Americans that will likely lead to missed rent and evictions.
[RELATED ARTICLE: Trump’s Big Ugly Bill Is a Loss for Housing]
“When you take away 4 percent of the lowest 10 percent of Americans’ income through tax policy, and you take away their health care coverage, and you take away their grocery benefits, their food benefits, they still have to pay rent, which is only going up,” Porter says.
According to the Joint Center for Housing Studies at Harvard University, as of 2022, the lowest income renters had less money left over after paying rent than at any point since at least 2001. More than half of renter households making $25,000 or less were on SNAP.
And there is some evidence that people with health insurance are better able to pay all their other bills. A 2019 study found that Medicaid expansions led to a slight decrease in evictions.
Climate Credits
The tax law makes $11 billion in cuts to climate funding from the Inflation Reduction Act, part of an overall $546 billion cut to clean energy. It eliminates the Greenhouse Gas Reduction Fund, which finances a range of carbon reductions including retrofits to make homes energy efficient. (What this will mean for obligated funds is contested.)
According to the Center on Budget and Policy Priorities, the law will also drive up utility bills by reducing alternative energy sources like wind and solar. An analysis from the Rhodium Group found that it could increase household energy costs by 7 percent by 2035. An analysis by Clean Energy Buyers Association from February found that repealing clean energy tax credits could cause businesses’ electricity costs to increase by 10 percent by 2026, which would be passed on to consumers.
It also means that many households will have to choose between keeping their homes at unsafe temperatures or no longer being able to afford their bills.
According to Harvard’s Joint Center for Housing Studies, as of 2024, “A quarter of lower-income renters regularly had to keep their home at a temperature they felt was unsafe or unhealthy in the previous year, including 11 percent of who reported doing so almost every month. Reducing their monthly energy consumption to this extent likely enabled some households to keep up with their utility bills despite the potentially detrimental impact on well-being.”
The nonprofit Grounded Solutions Network criticized the removal of the Greenhouse Gas Reduction Fund, saying in a press release, “Eliminating this program and the sustainable, affordable units it would create is a huge lost opportunity to grow the affordable housing supply. In addition, families that would have benefitted from reduced energy cost burdens through energy-efficiency rehab will now be more vulnerable to foreclosure or eviction.”
With the tax law in the rearview, elected officials who want to mitigate its enormous effects on Americans will have to wrestle with its effects on a state and local level. The most obvious way to undo the damage would be tax hikes on wealthy residents who disproportionately benefit from the law’s cuts.
By offsetting federal tax cuts under the law, funds could be re-routed to expanded health coverage, food assistance, and rental assistance at the local level. While tax increases on wealthy residents are often branded as left-wing, state level increases would be necessary just to return the country to the status quo of July 3.
Direct Cuts to Housing Loom
Advocates for affordable housing are now looking toward the Transportation, Housing and Urban Development (T.H.U.D.) appropriations bill released on July 13.
The House appropriations bill would further defund the nation’s public housing stock, with an over $500 million cut to the operating fund and close to a billion dollar cut from the capital fund. Congress has a deadline of Oct. 1 to pass the bill. On July 24, the Senate Committee on Appropriations approved the bill.
There is an estimated $90 billion repair need for public housing units across the country according to the National Association of Housing and Redevelopment Officials. This may be an underestimate, as New York City’s public housing system alone estimated in 2023 that it needed close to $80 billion for repairs.
The bill cuts HUD’s overall budget by 1 percent, according to analysis by the National Housing Law Project. “The bill would kick hundreds of thousands of American families off housing assistance and cut critical programs that fight housing discrimination, protect HUD tenants from health hazards, and preserve America’s deeply affordable housing stock,” Porter says.
This is because the bill would keep funding for “Housing Choice Vouchers”—which low-income renters use on the private market—at the same level as previous years, despite enormous hikes in rents, according to Will Fischer at the Center on Budget and Policy Priorities. An analysis by the Center relayed by Fischer to Shelterforce/Next City found that keeping vouchers at current levels would mean 400,000 fewer people were able to access vouchers.
The budget also calls for an enormous 29 percent decrease in funding for administrators at public housing authorities, who help people with Section 8 vouchers find housing in the private market. Given the stringent requirements of the program and ongoing challenges of voucher-holders who face income-based discrimination, this would significantly slow down tenants’ ability to find homes.
“Many agencies already weren’t receiving funding that they really needed to administer the program,” Fischer says.
The potential cuts to rental assistance would come at a time when people are extremely rent-burdened. According to a report from Harvard’s Joint Center for Housing Studies, the number of very low-income renter households grew by 4.4 million between 2001 and 2021. The number of people receiving assistance at this income level increased by less than 1 million.
One of the few housing programs with an increase in funding is project-based Section 8, a program where the federal government subsidizes rent for residents in a participating building and pays landlords directly. This program has been plagued by a lack of oversight of private landlords. The appropriations bill would increase funding 1.4 percent, which Fischer says is likely not enough to address maintenance and other increased costs. Tenant-protection vouchers, which help tenants who need to relocate, would see an increase of $38 million.
The bill also further attacks fair housing funding that has been imperiled since the Trump administration took over this year. The bill would completely eliminate the Fair Housing Initiatives Program, the source of funding for Fair Housing organizations that process 75 percent of all fair housing complaints.
The federal government outsources most of the enforcement of fair housing laws that prohibit discrimination to third party fair housing organizations. While eliminating the 1968 Fair Housing Act would require an act of Congress, the administration can essentially hollow out its most important protections by defunding enforcement. Indeed, it has attempted to do so unilaterally since taking over this year.
In a press release, the National Fair Housing Alliance executive vice president Nikitra Bailey said that cutting funding “would only worsen the housing crisis, while distressing and upending the most vulnerable communities that are currently being served.”
Porter questions the logic of cutting federal funding with the expectation that states would cover the losses. “The [HUD] Secretary has said this is about giving states skin in the game. But we all know that states just don’t have that skin to give,” Porter says.
“They are not sitting on massive reserves of budget dollars that they’ve been begging the federal government to use to pay the rent.”
This story was published through a collaboration between Shelterforce and Next City. Next City is a nonprofit news outlet that publishes solutions to the problems that oppress people in cities, inspiring social, economic, and environmental change through journalism and events around the world.
About the Author
Comments