OBBA Impacts to Housing & Community Development – North Carolina Housing Coalition

The One Big Beautiful Bill Act (OBBA) or H.R.1 is a large piece of legislation with widespread impact. In both the Senate and House versions of the OBBA there were provisions from the Affordable Housing Credit Improvement Act that are designed to boost the production of affordable housing [Sec 70422 – Permanent Enhancement of Low-Income Housing Tax Credit (pg 428)]. Two provisions in particular would go into effect starting in 2026. The first increases the 9 Percent Credit state allocation by 12 percent permanently, and the second, lowers the 50 percent private activity bond (PAB) threshold test to 25 percent permanently. For more information about these changes and how they strengthen the housing credit, click here.

The over 900 page bill also includes numerous changes that impact housing and community development through funding caps, extensions of community economic development initiatives, and rescission of funds. These include:

Sec 70421 – Permanent renewal and enhancement of opportunity zones
Sec 70423 – Permanent Extension of New Markets Tax Credit
Sec 70108 and Sec Modifies limits on the Mortgage Interest Deduction
Sec 70439 – Increases the percentage of real estate investment trust (REIT) assets that can be held in taxable REIT subsidiaries from 20% to 25%
Sec 30001 – Funding Cap (CUT) for the Bureau of Consumer Financial Protection
Sec 30002 – Rescinds unobligated funds from the Green and Resilient Retrofit Program under HUD

The bill also eliminates several Housing-Related Energy Efficiency Tax Credits such as:

Energy Efficient Home Improvement Credit
Residential Clean Energy Credit
Energy Efficient Commercial Buildings Deduction
New Energy Efficient Home Credit

In the same bill, there are numerous cuts to key social programs that provide individuals and families with healthcare, food support, financial assistance, and more. These cuts include:

All SNAP-ED funding for nutrition education and obesity prevention for low-income households is defunded after FY2025.
Changes to the state cost-sharing which will lead to program enrollment decline, an increase in denying benefits to eligible individuals, or SNAP funding being unsustainable for states to plan for the long term.
$1 Trillion funding cut from Medicaid
If states kept their current Medicaid expansion programs, it would mean an additional $93 billion in federal Medicaid funding responsibilities to states.
Many states – like North Carolina – have trigger provisions which would require either the ending of Medicaid expansion or revisiting expansion in the event that the federal government’s matching rates drop. If expansion is eliminated, the expansion enrollees would immediately lose their healthcare coverage.
Medicaid increasingly has been used for housing support. States like NC often use the Section 115 waiver which, in addition to traditional expenses, allows medicaid assistance to cover what they call HRSN – Health Related Social Needs. For housing, this may look like anything from first month rent and transitional housing support to accessibility modification, eviction prevention, case management, short term housing, stability support, and more.

This bill moved under the special legislative process called “reconciliation” which primarily deals with taxes and mandatory spending programs such as Social Security, Medicare, Medicaid, SNAP, and taxes. This is what allows it to bypass the normal filibuster rule that would require 60 votes in the Senate.

The mission of the North Carolina Housing Coalition is to lead a movement to ensure that every North Carolinian has a home in which to live with dignity and opportunity. What the Coalition knows best is housing policy, but we also know that stable housing, financial security, and opportunity for families at the lowest end of the income spectrum is about much more than housing costs. Marginally increasing the number of units that the low income housing tax credit can produce a year while potentially stripping health care from more than 670,000 North Carolinians and cutting food assistance hurts our state. Ultimately, when combined with the North Carolina General Assembly’s failure to pass a budget that includes gap financing through the Workforce Housing Loan Program, this federal increase in the LIHTC may not even result in more units. We’ll continue to provide coverage and analysis as the impacts of the OBBA unfold.

Sources

Analysis from NCGA fiscal research, NCDHHS, Medicaid, NCHA – * https://www.tillis.senate.gov/services/files/41E71724-D0FE-43B7-98C0-0E7821013421

Bill Timeline:

On May 16, 2025 – H.R.1 was introduced in the House
On May 18, 2025 – The House Budget Committee passed the bill with a vote of 17-16
On May 22, 2025 – The House passed H.R.1 with a vote of 215-214
On July 1, 2025 – The Senate passed the bill with amendments with a vote of 51-50
On July 3, 2025 – The House agreed to the Senate’s amendments with a vote of 218-214
On July 3, 2025 – The bill was sent to the President for signature
On July 4, 2025 – President Trump signed the OBBB

Sign Up for Housing Matters

Many thanks to our sponsors