Published on July 31st, 2025
By Colleen Winship

The affordable housing crisis in the U.S. is at a critical juncture. In addition to the existing shortage of 7.1 million affordable and available homes, significant changes to the housing landscape are either taking place or being proposed at every level of our nation’s government.

Keep reading to see how federal, state, and local policy changes — such as those included in 2025’s One Big Beautiful Bill (OBBB) — are reshaping the future of affordable housing, and to explore innovative solutions that can help address this crisis regardless of federal government shifts and proposed policies.

Current Landscape: The Cause and Effect of Today’s Housing Shortage

Solving for the housing crisis may be incredibly complex, but its cause has been clearly documented by the U.S. Chamber of Commerce: New home construction has failed to keep up with demand, resulting in today’s housing shortage.

Because supply is low and demand is high, home prices and rent costs have skyrocketed. Stubbornly high mortgage rates have further diminished both affordability and availability for virtually everyone in the United States:

• Over the last five years, market rate rents have increased by more than 50% in some cities. (U.S. Chamber of Commerce)
• More than 90% of extremely low-income renters are either in the labor force, are seniors, have a disability, are in school, or are single adult caregivers. (National Low Income Housing Coalition)
• Only 35 affordable homes are available for every 100 extremely low-income renter households. (National Low Income Housing Coalition)
• The average wait time for subsidized housing is two years and one month. (USAFacts)

The housing crisis has the most immediate impact on low-income households, but housing affordability and availability also put a long-lasting — and detrimental — strain on the national economy as a whole. States lose billions of dollars in economic output, consumer spending plummets, high interest rates keep current homeowners in place and create a “lock-in effect,” and employers are unable to effectively attract and retain top talent due to a lack of employee mobility.

That’s why, as the U.S. Chamber of Commerce notes, addressing the housing shortage isn’t just about the millions of Americans who rely on federal rent assistance today; it’s also essential for creating a stable market and ensuring long-term economic resilience for everyone in the country.

The Role of Federal Policy: How the One Big Beautiful Bill Impacts Affordable Housing

Affordable housing supply and demand may be a fundamental cause of the housing crisis today, but the impact of federal policy cannot be understated. As an example, let’s look at low-income housing-specific policies in the recently passed OBBB.

For affordable housing developers and advocates, the OBBB promises the largest investment in low-income housing tax credits (LIHTCs) in decades, which is a major win for LIHTC advocates. As outlined by Affordable Housing Finance, the bill:

“calls for a permanent 12% credit allocation increase beginning in 2026 and permanently lowering the bond financing threshold test from 50% to 25% for 4% LIHTC developments, also beginning next year. The permanence of the LIHTC provisions is significant because it allows housing advocates to move forward on a whole new Affordable Housing Credit Improvement Act with additional improvements for production like bond basis boosts…”

As a result, the OBBB’s LIHTC expansion could potentially finance up to 1.2 million more affordable units over the next 10 years.

On the other hand, the OBBB is also likely to have a severe impact on the same low-income, cost-burdened families and individuals that qualify for LIHTC and other affordable housing programs. 

In order to pay for extensive increases in spending elsewhere in the bill, significant cuts and changes have been outlined for other much-needed assistance programs, which could result in:

• 22.3 million US families — most of which are working families and families with children — are at risk of losing some or all of their Supplemental Nutrition Assistance Program (SNAP) benefits (Urban Institute)
• Millions of Americans who rely on Medicaid and the Affordable Care Act Marketplace are at risk of losing health insurance coverage because of deep cuts and stricter qualification requirements (Housing Finance)

Although a number of at-risk federal housing programs either have operational challenges yet to be solved or haven’t fully kept up with growing demand, simply cutting federal safety net funding and entire programs will only further impact cost-burdened groups and exacerbate the existing housing shortage.

The Role of State and Local Governments: Easing the Affordable Housing Shortage From the Front Lines

Federal policy may set the foundation and provide critical funding for national affordable housing, but state and local governments also play key roles in the day-to-day impact and administration of these programs. With the passage of the OBBB, it’s now more important than ever to work with state and local governments and find clearer pathways to affordable housing at every level.

For example, restrictive local zoning ordinances, including density limits, multifamily construction, and permit fees, can unintentionally contribute to higher housing costs. Even certain zoning ordinances designed to improve community character — like rigid historic preservation guidelines that limit new construction — only further restrict what can and cannot be built.

While the federal government’s role in affordable housing assistance is in flux, many states have started to enact new policies that help prevent unnecessary or overly restrictive housing development policies in order to ease the housing shortage:

• Ensuring Inclusionary Zoning: To increase supply, some municipalities in California and New York now mandate developers reserve a portion of new units for low-cost housing.
• Tapping Into Housing Trust Funds: Massachusetts’ Affordable Housing Trust Fund (AHTF) and Chapter 40B allow developers to override local zoning restrictions if they offer affordable housing units.
• Adopting By-Right Approval Processes: Simplifying and expediting permitting processes by adopting a by-right approval mode to unify and codify zoning and development regulations — like Atlanta, Georgia has done — can remove unnecessary administrative delays with construction.
• Guaranteeing Tenant Protections: Protecting tenants from displacement promotes stability for all. This includes ensuring just-cause eviction policies are in place and — as enacted in Phoenix, Arizona — source-of-income discrimination bans.

Even with innovative policies being implemented across the country, the only way state and local governments will be able to effectively ease the shortage of available and affordable housing is to work together. Specifically, they’ll need to break down the political and economic barriers that come with implementing local policies, while collaborating with regional advocacy groups to create the most efficient and impactful policies possible.

What’s Next: Creating a Better Affordable Housing Future Together

Regardless of what federal policy and funding for affordable housing look like in the future, the U.S. is facing — and will continue to face — a complex housing crisis that impacts virtually every person in our country and every aspect of our economy.

But the path forward is clear: Collaboration, innovation, and a renewed commitment to easing the persistent and widespread nature of the affordable housing crisis is essential, at every level. This includes creating federal policies with extreme thoughtfulness, consideration of long-term impacts from current funding allotments, and state and local governments working together to clear the way for developing more stable, affordable, and available housing for all.

For even more ways to overcome affordable housing management challenges and get ready for upcoming policy shifts, download our free guide below.