Legislative Updates
Nate Tortora
Vice President of Legislative Affairs
Things are relatively quiet at the State level however at the Federal level, we have both “The One Big Beautiful Bill Act” and FY 2026 appropriations as impactful legislation to be watching closely. These two pieces of legislation will have a significant impact on the future of affordable housing, and Public Housing Agencies (PHA) ability to serve our most vulnerable populations.
Reconciliation Package – The One Big Beautiful Bill Act
In a surprising development, Congress passed a major reconciliation package on July 3 known as the One Big Beautiful Bill Act. Many expected the version sent from the Senate to the House on July 1 to encounter resistance, making the ambitious July 4 deadline for final passage seem unlikely. However, Republican leadership was able to overcome internal divisions and secure passage of the bill, which was signed into law by former President Trump on July 4, 2025.
The legislation includes significant reforms to the Low-Income Housing Tax Credit (LIHTC) program and private activity bond (PAB) financing requirements—changes that may directly impact affordable housing development in Illinois. Notably, the bill permanently increases the 9% LIHTC allocation by 12% starting in 2026.
The reconciliation package also lowers the so-called “50% test” to 25% for developments using tax-exempt PABs. Under current law, at least 50% of a development’s aggregate basis must be financed with bonds to qualify for the 4% LIHTC. Reducing this threshold to 25% could allow more projects to qualify while relying on less scarce bond financing—an especially meaningful change in Illinois, where the state bond cap remains limited.
FY 2026 Appropriations
As Congress continues negotiations over tax and housing policy, the Trump Administration has released its full budget proposal for FY 2026—one that could dramatically reshape the landscape of federal housing assistance.
The proposal calls for a $32 billion cut to the Department of Housing and Urban Development (HUD), including a $26.7 billion reduction in federal rental assistance. Perhaps the most dramatic shift would be the conversion of rental assistance into state-based formula grants, alongside a proposed two-year time limit for adults without disabilities receiving housing assistance. Additionally, the budget seeks to eliminate $196 million in funding for HUD’s self-sufficiency programs, including the Family Self-Sufficiency (FSS) and Resident Opportunity and Self-Sufficiency (ROSS) programs.
HUD Secretary Turner testified before both the House and Senate Transportation-HUD (THUD) subcommittees in June to defend the Administration’s plan. When pressed for details, Secretary Turner framed the cuts as part of a broader effort to streamline HUD operations and reduce fraud and inefficiency. However, lawmakers from both parties raised serious concerns about the practicality and fairness of the proposed changes—particularly the term limits and funding model shift, which would likely require 60 Senate votes and thus face steep procedural hurdles.
The appropriations process will move forward in the coming weeks. The House is expected to introduce its version of the FY 2026 funding bill first, which is expected to align more closely with the President’s proposal. The Senate version is likely to reflect more traditional, bipartisan funding levels, similar to recent years.
For public housing agencies in Illinois, the proposed cuts raise significant concerns. Agencies are encouraged to stay in close contact with national partners and prepare to engage with members of Congress to share the local impact of these proposals. In making the case to federal legislators for HUD funding, it is best to do so through the lens of the overall economic impact that PHAs have on their local economies. For example, the impact that affordable housing development has on the construction industry, and the fact that PHAs contribute significantly to supporting their local private rental markets through Section 8 landlord payments.
Illinois General Assembly
There is not much to report at the State level. SB 1563, known as the Squatter Bill, was unanimously approved in the House and sent to Governor Pritzker’s desk. The legislation makes it easier for owners to gain control of their units from squatters and removes the legal standing of the squatter. This bill has been sent to the Governor’s desk.
Going into effect July 1, 2025, the General Assembly passed Prevailing Wage legislation. The legislation requires the higher prevailing wage between federal and state rates must be paid on public works projects receiving federal funding. If during the life of a project the prevailing wage increases, the new amounts will need to be paid.