THE LARGEST FEDERAL program aimed at spurring affordable housing construction got a major boost in the Trump administration’s new tax bill, a bipartisan win that drew cheers from affordable housing advocates and developers alike. But Massachusetts housing advocates decried what they said is a split-brain approach from the administration, as expansion of the Low-Income Housing Tax Credit came alongside Trump’s proposal to reduce funding for rental assistance programs like Section 8, which help cover housing costs for low-income tenants.  

It’s difficult logic to square, said Matt Noyes, director of state and federal advocacy for the Citizens’ Housing and Planning Association. “The two sides are not rowing in the same direction, to say the least,” Noyes said of the dual policy moves.   

Noyes said affordable housing depends on favorable zoning, “capital dollars to have shovels going in [the ground] and building frames going up, and operating dollars for rental assistance programs.” He said Trump is leaving the last part by the wayside.  

“There is just no way to subsidize housing development processes enough” to be affordable to the lowest income residents, he said, “without affordable rental assistance.” 

The tax incentive gives investors a stream of tax credits in exchange for providing funds for low-income housing projects, which can be for-profit or nonprofit developments. The projects must include a certain proportion of low-income housing units, preserved for at least three decades.  

Signed into law by President Trump on July 4, the federal tax bill provides the largest permanent increase to the 1986 tax program in decades. Beginning in 2026, annual tax credit allocations will increase by 12 percent, and the threshold for using tax-exempt bonds to finance projects has been lowered from 50 percent to 25 percent.   

Supporters tout the tax credit as a way to incentivize investment, generate jobs and tax revenue, and support working families, veterans, and seniors with stable housing at below-market rents. The Affordable Housing Tax Credit Coalition, a national group that supports tax credits as a way to unlock affordable housing, estimates that these changes could result in financing for 1.22 million new affordable rental homes over the next decade.  

The program is “such an important tool that it’s hard to overstate,” Noyes said. “Constructing homes has only gotten more expensive in recent years, and this is a critical tool to build the housing we need.”  

But equally critical, say housing advocates, are programs that help low-income renters bridge the gap between what they earn and the cost of housing.  

“The rental assistance is such a core part of the system and serves so many people,” said Clark Ziegler, executive director of the Massachusetts Housing Partnership, which strongly supports both the tax credit expansion and protecting rental assistance programs. “If that is compromised or in jeopardy,” he said, “that’s very concerning.” 

In few places is that as true as in Massachusetts. To afford market-level rent and utilities for a two-bedroom apartment in the state, without paying more than 30 percent of income on housing, a household must have annual income of $95,476, according to an analysis from the National Low Income Housing Coalition. Massachusetts is the fourth most expensive US state or territory based on this metric.  

Investments in new housing supply and direct rental assistance to tenants have traditionally been considered complementary approaches. Housing built with the tax credits primarily serves renters earning at or below 50 to 60 percent of area median income, which includes many struggling households but can exclude those with the lowest incomes who are typical recipients of rental assistance vouchers.  

“While it is an important resource,” the low-income housing tax credit “on its own, rarely builds or preserves homes affordable to households with the lowest incomes, those with the greatest and clearest needs,” the National Low Income Housing Coalition wrote in a pitch for reforms to the program last year.   

The tax credit changes had bipartisan support from the start – an usual feature in Trump-era policy – with years of support for expanding the tax incentive from lawmakers of both parties as well as more recently from the developer president himself.   

Trump’s support is “not a surprise,” said Ziegler. “This is a tax-credit-reform-happy administration that strongly prefers tax legislation to spending. That all fits and makes sense.”  

But the rental assistance that advocates say is also vital to affordable housing is in a precarious situation. Administration officials and some congressional leaders have advanced proposals to decrease funding for programs like the Housing Choice Voucher (Section 8), which provide direct assistance to low-income households, or limit the length of time a household can use federal rental assistance.  

The cuts are being justified on the basis of cost savings or administrative efficiency. The administration’s 2026 budget proposal says the spending plan “empowers states by transforming the current federal dysfunctional rental assistance programs into a state-based formula grant which would allow states to design their own rental assistance programs based on their unique needs and preferences.”  

Noyes said organizations like the Citizens’ Housing and Planning Association are not seeing the number of rental vouchers being reduced yet, but he and Zeigler worried about fewer vouchers in the market if cuts come or usage atrophies because of loss of faith in the federal program.   

Massachusetts, Noyes said, is fortunate to have its own state-based rental voucher program, serving about 10,700 households. A recent report from the MassINC Polling Group found the program is well-regarded, though it could use some administrative improvements.  

For now, the president’s desire to hand rental assistance obligations over to the states – by combining five major federal housing assistance programs run by the US Department of Housing and Urban Development into state block grants – has run into a roadblock in the Republican-controlled Congress.    

House and Senate appropriations committees preserved the structure of rental assistance programs in their HUD budgets. Republican committee chairs also expressed concern about the implementation and effectiveness of the HUD changes.  

“While there is a long way to go before the fiscal 2026 budget is adopted, there is reason for some optimism,” wrote Deborah VanAmerongen, strategic policy advisor in Boston-based Nixon Peabody’s affordable housing practice group. In her assessment, the current structure of each program may be preserved and funded.  

Zeigler, who says the administration’s approach to housing affordability is “not coherent,” agrees. “The House and Senate have been appropriating funds above and beyond what the president proposed,” he said. “It is not, to this point, rubber stamping of what the administration has proposed. It turns out it’s harder to let go of those safety net programs than people may have thought.”