New Policies That May Jump-Start Affordable Housing: Key Takeaways from Arbor’s Fall 2025 Report

Key Points

• The US is still short more than 7 million rental homes
• A new federal law makes it easier to build and rehab affordable housing
• States are cutting rules and speeding up approvals
• Affordable housing construction is expected to hold up better than market rate
• New legislation could lead to more CRE deals over the next few years

Arbor’s Fall 2025 Affordable Housing Trends Report shows a market with strong demand, slow construction, and major policy changes that could finally make it easier to build affordable housing. For CRE owners, investors, and brokers, this matters because it affects deal flow, financing, land use, and where capital will move next. Supply is still tight, but the rules are shifting toward making more projects possible.

 

1. Low Supply Is Still Driving the Market

The US is short about 7.1 million rental homes, and nearly 11 million renters are paying more than they can afford. Underbuilding is most severe on the West Coast, in the Northeast, and in the Great Lakes region. Permits for new multifamily buildings in 2025 fell back to pre-pandemic levels.

This lack of new housing keeps demand high across the board, especially for affordable and workforce rentals. Owners continue to see strong occupancy and steady demand in these segments.

 

2. New Federal Rules That Make Building Easier

• The One Big Beautiful Bill Act (OBBBA) brings major changes that help more affordable projects get off the ground.
• More LIHTC funding, which helps developers finance new affordable housing
• Easier rules for using the 4 percent rehab credit, making it cheaper to renovate older buildings
• Fannie Mae and Freddie Mac can now invest twice as much money into LIHTC deals, increasing the capital available
• Novogradic estimated that these changes could help create more than 1.2 million new affordable homes between 2026 and 2035.

OBBBA also made Opportunity Zones permanent and tightened the rules so investments go into true low-income areas. There are new rural incentives that offer even better tax benefits for projects in smaller towns.

3. States Are Also Making It Easier to Build

States are stepping in with their own housing reforms.

• California is speeding up approvals and streamlining the review process for new projects.
• Texas is cutting rules about lot sizes, parking, and design, and opening more commercial areas to mixed-use and multifamily.
• Washington is capping rent hikes at 7 percent + inflation or 10 percent, while also making development easier by reducing parking requirements, speeding up permits, and allowing conversions of empty commercial buildings into housing.

These changes lower costs and shorten timelines, which helps more deals move forward.

 

4. More Deals Coming in the Affordable Space

Yardi Matrix expects market-rate apartment construction to drop nearly 40 percent by 2026, but affordable housing construction will drop only about 25 percent. This shows affordable housing may stay more active and stable than standard multifamily over the next few years.

With new federal support, state reforms, and a long-term supply shortage, the affordable housing sector is set up for more deal flow and more development opportunities.

5. The States That Could See the Most New Affordable Housing

Arbor’s report includes a forecast showing which states are expected to benefit the most from the new rules in OBBBA. California leads by a wide margin, projected to add about 203,200 new affordable units over the next ten years. Georgia and Texas follow with 98,200 and 96,500 units. New York, Florida, Tennessee, Maryland, and Washington also rank high, each adding between 41,000 and 73,500 units.

This matters for CRE because these states are where the most new projects, tax credit activity, land deals, and partner opportunities are likely to show up. Developers, lenders, and brokers in these markets should expect more LIHTC projects, more rehab work, and more transactions tied to the policy changes.

 

Bottom Line

Affordable housing is still far behind where it needs to be, but the new rules and incentives are making it easier to build and rehab units. For CRE pros, this means more chances to develop, invest, and close deals in a segment that is staying strong even as market rate slows.

View the full report here.