Despite recent skepticism, as of the publication of this article it appears that House Republicans are moving forward with exploring a second budget reconciliation package.1 Similar to the strategy for passing the One Big Beautiful Bill Act (OB3), reconciliation would allow for a process to pass legislation in Congress while avoiding filibuster in the Senate. The specifics of any such proposal are unknown—funding, timing, or contents remain up in the air. What we do know, however, is that affordability is top of mind for legislators in Washington, D.C. Whether from commentary in President Donald Trump’s State of the Union address, the Republican Study Committee’s (RSC) “Reconciliation 2.0 Framework,” various hearings, and bills currently proposed, it appears that an upcoming reconciliation package may include provisions targeting real estate affordability.
Hearings & Letters
In January, Sens. Elizabeth Warren (D-MA) and Chuck Schumer (D-NY) led a roundtable focused on housing affordability. In conjunction with the hearing, the senators released a report noting that the median first-time homebuyer age has reached 40, coupled with an increase in foreclosures and rent struggles. Renee M. Willis, National Low Income Housing Coalition president and CEO, revealed, “research [has shown] nearly half of U.S. renter households are cost-burdened, needing to earn $33.63 per hour to afford a modest two-bedroom home at fair market rent.”
The House’s New Democrat Coalition also held a hearing later in January focused on “policies to incentivize more affordable housing production like cutting red tape, reforming zoning laws and funding tax incentives for developers to build more low-cost housing and preserve existing affordable units.” The National Association of Home Builders’ Chief Lobbyist Lake Coulson discussed bills at various stages in Congress, focusing on permitting, zoning reform, and training for home builders.2
The House’s Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs also held a January hearing titled “Housing Affordability: Saving the American Dream.” This Republican-led hearing included testimonies about proposals to address the “housing affordability crisis.” Edward J. Pinto, senior fellow and co-director at the American Enterprise Institute Housing Center, commented on how tax strategies could play a role, saying, “You could unlock an estimated 3.2 million rooms out of the 32 million spare rooms in owner-occupied single-family homes over ten years by providing an income tax exemption for rental income on newly rented rooms.” Pinto also suggested that houses are not being sold due to taxes on capital gains. Patrice Onwuka, director of the Center for Economic Opportunity at Independent Women's Forum, built on this suggestion, stating, “Congress has an opportunity here to exclude more income from taxation and potentially doubling the [capital gain] exclusion amounts from $250,000 to $500,000, and of course, indexing that for inflation. We’ve seen home prices rise over 200 percent since the last time those exclusion levels were set. This is going to break the lock-in effect for many seniors and home sellers.”
Along these lines, Secretary of the Treasury Scott Bessent received a letter from members of Congress’ Real Estate Caucus, urging an adjustment to the calculation of capital gains to account for inflation. Holding that the basis of real estate should be indexed to the impacts of inflation, the letter’s signors state that “taxing these phantom gains can discourage housing mobility, lock up housing supply, penalize long-term homeowners, and distort real estate investment decisions.”
RSC’s Reconciliation 2.0 Framework
The RSC issued its proposed framework in the event of a second reconciliation package. In addition to healthcare and non-tax-related housing proposals, the framework leverages tax policy to address real estate affordability. Proposals include the following:
- “Eliminate capital gains tax on the sale of homes to first-time home buyers, and on sales of rental homes to tenants, incentivizing property sales and enabling Americans to realize the American Dream of homeownership.”
- “End the taxation of inflation, ensuring that when Americans sell a home, farm, small business, or other assets, the taxes they pay on that sale are not influenced by how inflation has artificially altered the value of their investment.”
- “Impose a substantial tax penalty on foreign nationals, particularly those with ties to hostile foreign governments, who purchase land and real estate in the U.S. for investment purposes, crowding out Americans and artificially increasing the price of homes.”
- “Prohibit illegal aliens and non-permanent residents from using the Low-Income Housing Tax Credit.”
- “Establish Home Savings Accounts, through the existing Trump Account structure, and allow individuals to leverage other tax-advantaged savings accounts to make it easier than ever before for working Americans to save towards owning their first home.”
- “Establish Residential Emergency Asset Accumulation Deferred Taxation Yield (READY) accounts that allow Americans to contribute to a new tax-free savings account specifically for home mitigation and disaster recovery expenses consistent with the provisions included in the READY Accounts Act.”
Bills & Other Proposals
Amid this rhetoric, there are proposed bills that remain outstanding in Congress, and one that has passed, albeit different versions that they must reconcile, both the House and Senate. With the recent passage of the 21st Century ROAD to Housing Act (H.R. 6644) (Act), the likelihood of other related bills comes into question. Will it now be more likely for the underlying content of the proposed outstanding bills to be integrated into any forthcoming reconciliation package? Or is this an indication that there is an appetite to pass affordability legislation through on a standalone basis? Regardless, the content of outstanding bills provides insight into priorities of lawmakers.
According to the bill’s section-by-section summary, provisions within the Act include the following:
- “Prohibits large institutional investors from purchasing certain single-family homes to promote homeownership opportunities for American families, not corporations.”
- “Enables the HUD Secretary to give added weight to applicants for competitive HUD grants that are located in, or primarily serve, designated Opportunity Zones to support housing preservation and construction.”
- “Increases the Public Welfare Investment cap applicable to banks supervised by the Office of the Comptroller of the Currency and the Federal Reserve from 15% to 20%, which will enhance banks’ capacity to make private investments in affordable housing.”
- “Authorizes a pilot program to offer grants and forgivable loans to eligible recipients to holistically address home repair needs and health hazards to stabilize aging housing stock.”
- “Authorizes a pilot program to offer competitive grants to assist state, local, and tribal governments with regional housing planning and community development activities.”
- “Cuts red tape around environmental reviews, empowering state, local, and tribal governments to streamline reviews and increase housing development.”
- “Updates the federal definition of manufactured housing to include units not built on a permanent chassis to encourage innovation and expand naturally occurring affordable housing. It also ensures that no energy efficiency standards for manufactured housing take legal effect until adopted by HUD.”
- “Authorizes HUD’s Preservation and Reinvestment Initiative for Community Enhancement (PRICE) Program to provide grants to communities to maintain, protect, and stabilize manufactured housing and manufactured housing communities.”
- “Reduces HUD inspection delays by allowing units that are financed through other federal housing programs to automatically satisfy voucher inspection requirements if inspected within the past year. In addition, the bill permits new landlords to request pre-inspections to increase access to housing and encourage landlord participation.”
- “Reforms and reauthorizes the HOME Investment Partnerships Program.”
Currently back in the House, lawmakers will look to either accept the Senate’s adjustments or pursue further negotiations. What we don’t know yet is to what extent Trump will get involved in this process. The president appears to agree with the overall premise of this Act, stating in a Truth Social post, “People live in homes, not corporations.”3 However, the Trump administration is proposing slightly different means to similar ends. In Trump’s Executive Order, he states that “it is the policy of [his] Administration that large institutional investors should not buy single-family homes that could otherwise be purchased by families.” While the Executive Order leaves open to Treasury the interpretation and definition of what qualifies as a “large institutional investor,” the current version of the Act limits the number to 350 single-family homes with exceptions for rental property (“build-to-rent”) and certain programs.
This inclusion also reflects the purpose of the American Homeownership Act, which was introduced to target “private equity, hedge funds, private real estate investment trusts (REITs), and big investment managers,” and other corporate entities. The proposal is aimed to dissuade these entities from “buy[ing] up more than 50 single-family homes for rent,” and keeps them from receiving other tax incentives related to real estate purchases. This includes disallowing deductions for both depreciation and interest paid. Exceptions and special allowances are included in this proposal to incentivize building new property or renovating uninhabitable homes.
In addition to the provision targeting institutional investors, H.R. 6644 echoes the Senate’s originally proposed version of a housing affordability bill. The ROAD to Housing Act of 2025 (S. 2651) includes sections focused on opportunity zones, “permit[ting] the HUD Secretary to give additional weight to competitive grant applicants located in, or that primarily serve, a community that has been designated as an opportunity zone.” Further, the bill would allow for inspections under the Low-Income Housing Tax Credit (LIHTC) program (among other programs) to meet the inspection requirements for the Housing Choice Voucher (HCV) program, allowing renters to move in sooner. Therefore, not all provisions from S. 2651 were included in H.R. 6644. It is possible that these additional topics be included in a second reconciliation package.
Similarly, the Affordable Housing Credit Improvement Act of 2025 (H.R. 2725) could find its way into reconciliation to the extent the changes remain unaddressed in H.R. 6644. H.R. 2725 focuses on the LIHTC, providing for increases in state allocations and reforms to tenant and credit eligibility among other provisions. The bill has bipartisan support with 164 co-sponsors, indicating that changes to LIHTC could be a possible topic among reconciliation discussions.
What Now?
To be clear, these bills, hearings, and proposals are simply that—proposed. Even if a “Reconciliation 2.0” package were to solidify, it’s unclear whether there would be enough political momentum to pass such legislation considering midterm elections and other global events. The fate of H.R. 6644 could also impact the urgency for additional legislation supporting the real estate industry.
Keep an eye out for updates from our Washington National Tax Office in our weekly From the Hill newsletter or our Tackling Tax Podcast. Reach out to an experienced professional at Forvis Mazars for more.