By Jorge Casuso
August 15, 2025 -- President Donald Trump's historic spending bill will provide a major boost for affordable housing development in Santa Monica, which has been struggling to meet its State mandated target.
The sweeping spending package includes a tax provision, largely ignored by the national media, that expands the Low-Income Housing Tax Credit (LIHTC) resulting in financing for an estimated 1.22 million additional rental homes over the next decade.
The provision is expected to have a major impact on Santa Monica's efforts to jump start affordable housing at a time when local residential development is at a standstill.
Community Corp. of Santa Monica -- which has built or restored more than 100 properties totaling 2,000 affordable units -- estimates that the LIHTC comprises 40 to 60 percent of total project costs and are used to help finance 80 to 90 percent of its projects.
The LIHTC is "an extremely valuable resource for affordable housing development" and provides a form of equity "that doesn’t need to be repaid by the project," said Tara Barauskas, executive director of Community Corp.
"We see the expansion of the LIHTC as very positive in terms of being able to build additional affordable housing, though it is not the sole source of funding," Barauskas said.
Dave Rand, an attorney who represents many of Santa Monica's largest housing developers, called the provision "a very big deal."
"It is the one positive part of the 'One Big Beautiful Bill', in my view," Rand said. "It represents a massive sea change in tax credit law."
The LIHTC provision in the spending bill offers a permanent 12 percent increase in Housing Credit allocations, "which helps states finance more affordable rental housing projects every year," according to Enterprise Community Partners, a national nonprofit housing developer.
It also makes it easier to receive an LIHTC by requiring that at least 25 percent of the project financing comes from tax-exempt bonds, instead of 50 percent.
The much lower threshold "will make it much easier to finance affordable homes using tax-exempt bonds, unlocking more projects that previously didn’t pencil out," according to Enterprise's website.
Enterprise -- which has invested $80.9 billion and created 1 million units nationwide since 1982 -- called the expansion of the LIHTC "a historic boost for affordable housing production."
On August 5, the Federal Housing Finance Agency (FHFA) announced that consistent with the new provision, it is "doubling the amount that Fannie Mae and Freddie Mac can invest in safe and sound Low Income Housing Tax Credit properties."
The amount will rise from $1 billion to $2 billion for each of the two federal lenders, for a total of $4 billion per year, according to a press release issued by FHFA.
The unexpected funding mechanism comes at a propitious time for Santa Monica, where according to City officials there has been a "dramatic slowdown in housing construction."
Of the more than 3,400 market rate and 900 affordable units approved under a streamlined process adopted by the City Council in 2023, only 181 have been issued building permits ("Council Takes Up Emergency Ordinance to Kick-start Housing Construction," August 11, 2025).
On Tuesday, the Council gave the go-ahead for an emergency ordinance that will allow market rate developers to meet their affordable housing quotas by "pooling" affordable units from multiple projects and building them at an off-site location.
Developers also will be allowed to rehab existing multifamily units owned by third parties the City has declared uninhabitable.
"It is a very fortuitous opportunity and timing of these things coming together," Rand said.
Despite the new influx of anticipated funding from the expanded tax credit, Barauskas notes that Community Corp's developments require additional funding from the City's Housing Trust Fund, the County or the State.
Meeting the State's housing target for Santa Monica -- which requires planning for 6,168 new affordable units by October 2029 -- "will still depend on the ability to obtain some of these other resources for projects.
"However, the larger supply of LIHTC may allow more projects overall to be built; it’s a highly competitive program that is oversubscribed," Barauskas wrote in an email to The Lookout.
