TL/DR –
The Trump administration’s new budget reconciliation law includes both minor investments in housing and major cuts to social programs such as Medicaid and Medicare. The law boosts the Low Income Housing Tax Credit (LIHTC) and establishes funding for the Opportunity Zones program, but critics argue it doesn’t do enough to address the complexities and inefficiencies of the existing LIHTC system. The law also includes cuts to essential social programs, such as $1 trillion and $490 billion from Medicaid and Medicare respectively over the next decade, and is estimated to increase the number of uninsured people by 10.9 million, and cause 22.3 million families to lose food assistance benefits.
The impact of the Trump administration’s new budget reconciliation law
The newly-signed tax law by the Trump administration includes minor investments in housing while making major cuts in health care, food aid, and climate programs, reducing housing affordability for renters and homeowners. The law, previously named “One Big Beautiful Bill”, boosts the Low Income Housing Tax Credit (LIHTC) and funds the Opportunity Zones program, designed to attract investment in low-income areas.
LIHTC, the main affordable housing financing source in the US, has been criticised as complex and ineffective. Critics argue that the Opportunity Zone program, introduced in the first Trump administration, has benefitted private equity more than low-income areas. The new tax law also introduces significant cuts to social programs, with Medicaid and Medicare losing $1 trillion and $490 billion respectively over the next decade. The law is expected to increase the number of uninsured people by 10.9 million and lead to 22.3 million families losing food assistance benefits.
Noëlle Porter, director of government affairs at the National Housing Law Project, views the legislation as an attack on those experiencing poverty. The implications of the law for renters and homeowners are significant, raising utility bills due to cuts to climate tax credits and affecting those who rely on social safety health programs.
The Rent Eats First
The tax law provides a much-needed boost to the LIHTC, which was significantly underfunded. The new law increases states’ LIHTC allocations by 12 percent. The National Apartment Association believes the law will help increase affordability, supply, and protect the nation’s rental housing infrastructure.
However, the LIHTC program does not have the same protections as other affordable housing programs administered by HUD. Porter suggests that there should be increased protections on how LIHTC credits are applied, indicating that the IRS does not provide the same protections for survivors of domestic violence in LIHTC housing as tenants in HUD-administered programs.
Climate Credits
The tax law introduces $11 billion in cuts to climate funding from the Inflation Reduction Act, resulting in a total cut of $546 billion to clean energy. This could increase household energy costs by 7 percent by 2035, forcing households to choose between maintaining safe temperatures or affording their bills.
Direct Cuts to Housing Loom
Advocates for affordable housing are now focusing on the Transportation, Housing, and Urban Development (T.H.U.D.) appropriations bill released on July 13. The bill would further defund public housing with an over $500 million cut to the operating fund and close to a billion dollar cut from the capital fund.
The bill also proposes a significant decrease in funding for administrators at public housing authorities, slowing down tenants’ ability to find homes. 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 but the number of people receiving assistance at this income level only increased by less than 1 million.
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