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January 2026: Tax policy emphasizes development incentives
Geographically targeted tax incentives will play a prominent role in promoting affordable housing development, according to a new national report from Yardi Matrix.
For example, the Opportunity Zones program, which offers tax incentives for development in low-income submarkets, received a long-term extension in 2025. Also last year, Low-Income Housing Tax Credit allocations were expanded by 12%.
These federal actions, along with measures that enable developers to raise more LIHTC equity for projects in Difficult Development Areas, where costs for land and other resources are high relative to the area median income, “aim to improve project feasibility in underserved or high-cost environments,” the report notes.
While the impact of such factors as interest rates and capital and construction labor availability remain to be seen, “the combined weight of federal and state support positions the multifamily sector for a decade of elevated activity,” according to Yardi Matrix, which projects that the LIHTC program will deliver nearly 215,000 units over the next three years.
Incentive program facts
- The Low-Income Housing Tax Credit program has been responsible for more than 3.5 million affordable units since its inception in 1986. The legislation that created LIHTC also designated Difficult Development Areas.
- There are 4.1 million units in Difficult Development Areas and 2.3 million units in Opportunity Zones, which was created in 2017 as part of a tax reform package. Of the total, 5.1 million units are market rate and 1.3 million are fully affordable.
- The 348,000 combined Opportunity Zone and Difficult Development Areas units under construction represent 5.4% of total in-place stock. The fully affordable units under construction would add 6.9% to DDA stock and 5.5% to Opportunity Zone stock.
Get the full story
Read about how Opportunity Zones and Difficult Development Areas align capital with affordability needs in the January 2026 Yardi Matrix National Affordable Housing Report.
