The Low-Income Housing Tax Credit (LIHTC) remains the nation’s primary tool for financing affordable rental housing. Based on LIHTC activity reported between January and June 2026, affordable housing investment appears to be concentrating in states that are combining federal credits with state credits, housing subsidies, tax-exempt bonds, housing trust funds, and targeted policy tools. 

The activity reported during the first half of the year shows several clear patterns. Some states reported major allocation rounds or large financing packages. Others advanced legislation to expand, modify, or create state housing tax credits. Preservation activity also appeared frequently, showing that states are not only financing new construction but also working to protect existing affordable housing. 

New York, Massachusetts, and California Lead by Scale 

Several states reported large LIHTC allocations, major financing announcements, or significant development pipelines during the first half of 2026. 

New York reported some of the largest LIHTC allocation activity identified during the period. New York State Homes and Community Renewal allocated $564.2 million in federal LIHTCs, $100 million in state LIHTCs, and $176 million in subsidy loans to create and preserve 27 affordable housing developments totaling 1,798 rental homes. New York City also launched the NYC Housing Investment Initiative, a $4 billion commitment to finance affordable housing development over four years. 

Massachusetts also reported significant activity. The Massachusetts Executive Office of Housing and Livable Communities awarded $257 million in federal LIHTCs, $32.4 million in state LIHTCs, and $81.4 million in housing subsidies to 15 developments totaling 1,008 homes statewide, including 903 affordable homes. Massachusetts activity also included redevelopment, preservation, adaptive reuse, and public housing transformation projects. 

California continued to report significant affordable housing development activity during the first half of 2026. A March report found that approximately 40,000 affordable homes across 461 developments in California were awaiting final funding before construction could begin. At the same time, LIHTC-supported developments involving supportive housing, senior housing, farmworker housing, and mixed-income housing continued to move forward. 

State Housing Tax Credits Are Becoming More Important 

One of the most notable developments in 2026 is the growing role of state housing tax credits. 

Historically, federal LIHTCs served as the primary source of tax credit equity. Today, many states are creating or expanding their own housing tax credit programs to address financing gaps and increase production. 

Wisconsin enacted legislation requiring the Wisconsin Housing and Economic Development Authority to set aside at least 35% of state LIHTCs each year for rural areas. Maine enacted legislation extending the sunset date for its state affordable housing tax credit from December 31, 2028, to December 31, 2036. Hawaii considered legislation that would extend the state LIHTC sunset date and allow credits to be transferred or sold. Michigan introduced legislation to create a new state housing opportunity tax credit with a proposed $42 million allocation cap for the 2027 award cycle. 

These efforts reflect a growing recognition that federal resources alone are often insufficient to meet housing demand. 

Preservation Is Becoming a Major Housing Strategy 

While new construction receives significant attention, preservation emerged as one of the strongest affordable housing trends of 2026. 

North Carolina reported multiple acquisition-rehabilitation and resyndication transactions during the first half of the year, including affordable housing communities in Durham. These transactions were designed to extend affordability restrictions and modernize aging housing stock. 

Massachusetts reported significant preservation and redevelopment activity, including projects in Worcester, Somerville, and Brockton. New York, Illinois, Connecticut, and Texas also reported preservation or rehabilitation activity tied to LIHTCs, tax-exempt bonds, or other public financing sources. 

As many LIHTC properties approach the end of their original compliance periods, preservation is becoming increasingly important to maintaining the nation’s affordable housing inventory. 

Emerging Housing Markets Are Gaining Momentum 

Several states that have historically received less national attention are showing increased affordable housing activity: 

• Oklahoma emerged as one of the most active policy and development markets during the first half of 2026. In addition to multiple LIHTC-supported developments, state lawmakers considered legislation to double the Oklahoma Affordable Housing Tax Credit allocation.  

• Colorado reported significant activity across mixed-income, senior, and supportive housing developments financed through combinations of federal LIHTCs, state LIHTCs, private activity bonds, and local funding sources. The state also considered legislation focused on expanding housing opportunities for individuals with intellectual and developmental disabilities.  

• Ohio continued to expand housing models that combine affordable housing with supportive services. Projects reported during the period included senior housing, assisted living communities, and developments serving residents with advanced health and service needs through partnerships with healthcare and service providers.  

• Tennessee continued to attract LIHTC investment, particularly in the Nashville region, where population growth and housing affordability pressures are driving demand for affordable rental housing and encouraging new multifamily development.  

• Arizona combined development activity with housing policy proposals, including legislation to create a Rural Development and Housing Premium Tax Credit designed to encourage affordable housing production in underserved areas of the state.  

• Idaho and Wyoming advanced affordable housing production through statewide allocation rounds that directed LIHTC, HOME, and National Housing Trust Fund resources toward developments in both growing metropolitan areas and rural communities.  

• Arkansas continued to support affordable housing growth through LIHTC-financed development and additional housing investments, including Federal Home Loan Bank affordable housing funding that helped leverage new construction activity. 

Collectively, these states illustrate how affordable housing growth is expanding beyond traditional high-volume markets into smaller and increasingly active regional housing markets. 

Housing Is Becoming More Specialized 

Another notable trend is the growing number of developments serving specific populations. 

Many new developments completed or financed during the first half of the year focus on seniors, veterans, individuals experiencing homelessness, survivors of domestic violence, people with disabilities, and residents needing supportive services. 

This trend reflects broader efforts to address housing instability through integrated housing and service models. Affordable housing is increasingly being used not only to address cost burdens but also to support health, workforce participation, aging in place, and long-term housing stability.

Start With the Federal Rules

Federal LIHTC rules set the baseline for every project. Our federal resource library places the guidance at your fingertips, so you always know the floor you are working from.

Then Look at Your State

State credits, set-asides, and deadlines are changing fast, and they differ from place to place. Our state library tracks the programs and rules for where you operate.

What This Means Moving Forward 

The first half of 2026 demonstrates that affordable housing finance is becoming increasingly complex and increasingly state-driven. 

New York, Massachusetts, and California continue to lead by scale. However, some of the most important developments are occurring in states such as Oklahoma, Wisconsin, Michigan, Colorado, and North Carolina, where policymakers are expanding financing tools, creating state tax credits, and developing new approaches to affordable housing production and preservation. 

For housing agencies, developers, and affordable housing stakeholders, the message is clear: understanding state-level housing policy may be just as important as understanding federal LIHTC rules. The states that are successfully combining federal credits with local financing tools, preservation strategies, and legislative innovation are increasingly becoming the centers of affordable housing growth. 

As the second half of 2026 unfolds, those states will likely remain the markets to watch.

Stay Ahead of Where LIHTC Is Heading

The map is shifting under affordable housing finance, and the states leading right now are the ones combining federal credits with their own tools. Keeping projects moving through that complexity takes more than knowing the rules. It takes the capacity to act on them. If your team is working to stay ahead of where LIHTC is heading, our team is here to talk it through.