Click to View as Webpage

The recent election results at the federal level have set off a cascade of developments in Washington, offering a preview of an unpredictable few years ahead. Potential policy changes – especially the upcoming “Tax Super Bowl” – could be consequential for affordable housing and community development. This edition of Policy Pulse describes the balance of power in Washington and what the potential landscape could look like for affordable housing community development. At the end of this newsletter, we’ve also provided brief updates on state elections in Cinnaire’s footprint. 

Cinnaire will continue working to stay up to speed on the latest developments. If you have questions or feedback, please contact Chris Neary for questions on federal policy issues and J.T. Mackey for questions on state policy issues. 



In this edition: 

• The Changing Balance of Power in Washington 
• Major Tax Legislation Expected and Implications for Affordable Housing and Community Development
• Federal Appropriations Outlook 
• Trump Agenda on Housing and the Economy 
• State Election Update and Impact on Policy 
• New Analysis Showing Substantial Rent Savings to Residents in Housing Credit Properties 

The Changing Balance of Power in Washington

In addition to the White House, Republicans won back the Senate majority and will outnumber Democrats 53-47 in the 119th Congress. Republicans retained the House of Representatives, but with a very narrow majority (220-215). This majority is expected to shrink in January, when the three House members President-elect Trump nominated to serve in his Cabinet will step down.  

With slim majorities, Republicans will need Democratic votes in the Senate – and likely in the House – to advance most major legislation, including regular funding for federal agencies. We are seeing House Speaker Mike Johnson attempting to thread that needle this week to extend government funding into next year.

However, Republicans can enact major tax and spending legislation through the budget reconciliation process, which requires only a simple majority in the Senate. This special congressional process has been used by both Republicans and Democrats to advance their spending or tax cut priorities in the past. For example, Republicans used reconciliation to enact the Bush and Trump tax cuts, while Democrats recently used it to enact the Inflation Reduction Act (IRA). 

In addition to confirming President-elect Trump’s nominations in the Senate, a top priority for Congressional Republicans in 2025 will be dealing with $4.6 trillion worth of expiring tax cuts that Republicans enacted in 2017 as part of the Tax Cuts and Jobs Act (TCJA). The result is the “Tax Super Bowl” – very likely the largest tax package ever considered by Congress. While this remains a political necessity for Republicans to prevent tax hikes in 2026, there has been a debate among the GOP about whether to use the budget reconciliation process to first advance legislation focused on the border and energy or to handle everything in one package.  



We will need to see how that debate plays out, but we know that tax legislation will be debated in 2025, even if it’s delayed. While Republicans are unified in their desire to use budget reconciliation to advance tax cuts, there are many unknows, including to what extent Republicans are comfortable adding to the debt and how to balance competing priorities. Given these unknowns and the lengthy reconciliation process, it will take time for this bill to take shape. 

With so much uncertainty around the size and scope of tax legislation, it is not clear how any final tax bill might affect our work. Regardless, there will be strong pushes to include provisions in the tax package to enhance affordable housing and community development tax programs.

Congressional champions of the Low-Income Housing Tax Credit (LIHTC) program will be advocating to enhance the program as part of the tax package. There is significant interest in advancing the two provisions from the Affordable Housing Credit Improvement Act (AHCIA) that passed the House in 2023 as part of a stalled bipartisan tax package: (1) increasing 9% allocations available to states and (2) lowering the 50% bond financing test. If enacted, these provisions could significantly increase resources available for affordable housing developments. It is also possible that the tax package could include other LIHTC provisions.  

While prospects are uncertain, there is major bipartisan support for the LIHTC program in Congress, including the Republican leadership and members of the tax-writing committees. It is also possible that there could be risks to the program, which the affordable housing community will be closely monitoring.

Incoming Senate Finance Chairman Senator Mike Crapo (R-ID) and House Ways & Means Chairman Jason Smith (R-MO) 

Community Development Tax Items 

In addition to LIHTC provisions, there are several community development tax incentives that could be considered in a tax package: 

• New Markets Tax Credit (NMTC). Authorization for the NMTC expires at the end of 2025. Like the LIHTC program, there is significant bipartisan support for the NMTC program, including by Republican tax-writing committee members. The NMTC Coalition will be pushing for making the program permanent and increasing NMTC allocations.  
• Neighborhood Homes Investment Act (NHIA). The NHIA would create a new tax credit for the development or renovation of 1-4 unit homes for homeownership in distressed neighborhoods where the cost of development exceeds the market value of the home. This legislation also has bipartisan support, but it may be difficult to create new programs in a partisan tax package. 
• Opportunity Zones. A trademark of the TCJA, the Opportunity Zone program will likely be extended and possibly enhanced.  

As in the first Trump Administration, it is widely expected that the second Trump Administration and House Republicans will propose major cuts to domestic discretionary spending, including affordable housing and community development programs. However, as noted above, any cuts through the regular appropriations process would need to go through the Senate, where Democratic votes are needed to pass any spending bills. With a tight majority in the House, it is also likely that Democratic votes will be needed in that chamber. 

There are several federal programs that are critical complements to the LIHTC program, including vouchers, the HOME Investment Partnerships program, the Community Development Block Grant (CDBG) program, USDA Rural Development programs, and others. In addition, the Community Development Financial Institutions (CDFI) Fund administers competitive grant programs to support CDFIs. 

While a tight spending environment is expected, the need to advance major funding legislation with Democratic votes should temper the President-elect's proposals to zero out or majorly reduce spending on affordable housing and community development programs.



Scott Bessent

Scott Turner

President-elect Trump has recently announced key nominations to head up his economic and housing policy agenda, tapping Wall Street financier Scott Bessent as his Treasury Secretary and Scott Turner to head the Department of Housing and Urban Development. Trump also named Kevin Hassett, who previously served as Director of the Office of Management and Budget in Trump’s first term, to direct the National Economic Council. 

Beyond the reconciliation process, the second Trump Administration could run into barriers getting major legislation through Congress. The Administration is expected to pursue mass deportations and impose tariffs with or without Congressional approval, which could have a significant impact on the economy and housing development.  

We will also be watching potential agency activity that could directly affect the affordable housing and community development industries.

State Election Update and Impact on Policy

The outcomes of the 2024 election at the state level may be less turbulent than the federal level but the results have shifted the balance of power in some states and elected new governors in two states within Cinnaire’s footprint. Looking ahead to 2025, the fiscal environments in states and the changes in the state legislatures and governors' offices could impact policy decisions and resources for affordable housing and community development.  

In 2025, state lawmakers will be developing budgets for the first time without the additional resources of the federal American Rescue Plan Act which provided significant resources to states during a tumultuous economic period. State budgets are expected to be more in line with pre-pandemic state budgets and some states are already forecasting budget deficits that will need to be reconciled.  

The following is an overview of state election outcomes and the potential impact on policies.

A new analysis by the Affordable Housing Tax Credit Coalition (AHTCC) demonstrated that homes financed using the Low-Income Housing Tax Credit (Housing Credit) provide rents that are 38% lower than market-rate properties on average, saving tenants an estimated $7,800 annually—or $653 per month. This affirms that tenants in Housing Credit homes spend significantly less on rent than market rate, allowing them to allocate more of their income toward essential needs such as food, health care, transportation, and childcare.  

With the nation’s housing crisis intensifying and Congress preparing for major tax legislation in 2025, these findings highlight the urgent need and opportunity to expand and strengthen the Housing Credit, the nation’s most effective tool for producing affordable housing. The full report can be accessed here.  

Want to Stay Up-To-Date? Subscribe Here