Summary: With the 21st Century ROAD to Housing Act law and the bank public welfare investment cap rising from 15% to 20%, billions in private capital could flow toward the Low-Income Housing Tax Credit (LIHTC). Developers and investors should revisit the next 12 months of deals as early as now to be ready for the capital and process changes.
In our recent Aprio webinar, “Tax Credits, Affordable Housing, and the Road Ahead: What the 21st Century ROAD to Housing Act and One Big Beautiful Bill Act Mean for You,” we discussed a walk-through of a remarkable 12 months for affordable housing policy, and explained what comes next.
If you develop, invest in, or finance affordable housing, a great deal has shifted beneath your feet. A historic expansion of the Housing Credit, a new housing law that had been years in the making, and a set of pending tax and regulatory changes all point toward more private capital and fewer process bottlenecks. The hard part is knowing which of these changes actually touches your next deal, and that is exactly where the high cost of unknowns can quietly erode returns.
This article covers what the new law changed, why lifting the public welfare investment cap matters, what is next for Housing Credit demand, how the broader tax and funding landscape is shaping up, and the two or three things to do differently right now.
What Did the 21st Century ROAD to Housing Act Change?
The 21st Century ROAD to Housing Act became law on July 11, 2026, without the president’s signature, through the 10-day process that lets a bill become law once Congress presents it. It is essentially a compilation of dozens of bipartisan housing bills, some of which had been waiting years for the right legislative vehicle.
Key provisions for affordable housing include:
- Public welfare investment cap: This lifts the bank public welfare investment (PWI) cap from 15% to 20%.
- Institutional single-family ban: This bans institutional investors from buying single-family homes. It has been revised so it no longer affects build-to-rent properties, with House leadership clarifying on the floor that it does not apply to LIHTC.
- HOME program and BABA: It modernizes the HOME program and directs the U.S. Department of Housing and Urban Development (HUD) to revisit its Build America, Buy America (BABA) process and report back.
- Environmental reviews: It streamlines National Environmental Policy Act (NEPA) reviews, including the elimination of outdated, duplicative requirements for recently developed sites.
- Rental Assistance Demonstration: This raises the Rental Assistance Demonstration (RAD) cap by 100,000 units.
- Disaster recovery: This authorizes the Community Development Block Grant –Disaster Recovery (CDBG-DR) program for three years.
Just as important is what the law does not do: it provides no new appropriations and no new tax revenue for affordable housing. For context, last year’s Housing Credit expansion carried $15.7 billion.
Why Does Lifting the Public Welfare Investment Cap Matter?
The PWI cap was set long ago, when these tax credits were viewed as riskier investments and regulators worried about banks becoming overleveraged. In the early 2000s, the cap increased from 10% to 15%, and public welfare investments by banks grew from roughly $3 billion to about $27 billion over the following years. Because close to 80% of public welfare investment goes into LIHTC, the cap has a direct bearing on how much private capital reaches affordable housing.
To gauge how many banks were pressing against the ceiling, the AHTCC, the Affordable Housing Investors Council, and the National Association of Affordable Housing Lenders surveyed the market. Among 22 responding banks representing more than $14 billion of Housing Credit investment in 2024, nearly two-thirds of all bank investment in the credit that year, $6.1 billion, or over 42% of that capital, came from banks nearing the 15% cap.
Lifting the ceiling to 20% does not send a wave of capital rushing in overnight. Banks will need to request approval, clear safety and soundness checks, and wait out a rulemaking process at the Office of the Comptroller of the Currency (OCC). The change is not automatic, but approvals could realistically come within the next several months, and easily within a year.
What Should Developers and Investors Do Now?
Here are a few practical moves you can do differently over the next 12 months:
- Reassess BABA exposure by approaching its involvement in your deals with cautious optimism, as relief could arrive over the coming months.
- Revisit environmental reviews by reviewing whether requirements you once had to meet still apply now that NEPA reviews have been streamlined.
- Engage on the PWI process through working with banks nearing the cap. There is no harm in asking the OCC about the request process now rather than waiting for every rule to be finalized.
- Plan for RAD competition by estimating the RAD cap up by 100,000 units and roughly 40% of RAD conversion financing coming from LIHTC.
Final Thoughts: How Acting Early Can Help Transform Your Affordable Housing Pipeline
The past year handed the affordable housing industry back-to-back wins: a Housing Credit expansion, then a housing law that clears process hurdles and lifts the PWI cap. None of them turns into capital or closed deals on its own. The teams that map these changes to their own pipelines will now be the ones ready when the capital moves. Aprio has a team of dedicated affordable housing advisors who track each of these developments as it happens.
