The 21st Century ROAD to Housing Act became law last week without President Trump’s signature, marking the most significant housing legislation in over three decades. The bill contains provisions specifically designed to address a financing crisis that the affordable housing industry didn’t see coming. Last year’s expansion of the Low-Income Housing Tax Credit program through the One Big Beautiful Bill Act created a structural problem that this year’s ROAD Act is meant to solve. More credits are available, but the value of each credit has declined. More housing can theoretically be financed, but the gap between what projects need and what equity financing can provide has widened. The ROAD Act’s primary affordable housing strategy is to unlock billions in new investment capital by raising the public welfare investment cap for banks from 15 percent to 20 percent.

In 2024, national banks invested $27.9 billion annually in public welfare investments across all categories. Roughly 80 percent of that amount—approximately $23.1 billion—went directly into the Low-Income Housing Tax Credit. That concentration matters because it reveals both the depth of bank commitment to affordable housing and the constraint the 15 percent PWI cap has created. More than 42 percent of all LIHTC equity investment in 2024 came from banks that were already nearing or had reached their 15 percent cap. Those banks couldn’t deploy additional capital into affordable housing even if they wanted to. The cap has remained unchanged since 2006. Twenty years of inflation, economic growth, and bank capital accumulation have rendered it obsolete.

The One Big Beautiful Bill Act delivered a permanent 12 percent increase in LIHTC allocations beginning in 2026 and lowered the private activity bond requirement from 50 percent to 25 percent. These changes were designed to expand affordable housing supply dramatically. Novogradac estimated the changes could finance 1.2 million additional affordable rental homes by 2035. But expansion requires funding. The affordable housing industry estimated that OBBBA would require $5 billion to $7 billion in additional tax credit equity investment annually on top of the existing $28.9 billion in order to make the supply expansion work. Current bank capacity wasn’t sufficient to meet that need with the 15 percent PWI cap in place.

The ROAD Act’s response is to expand the pool of investors available to buy those credits by increasing capacity at the banks already financing most of the LIHTC market. Banks supervised by the Office of the Comptroller of the Currency and the Federal Reserve face regulatory constraints on how much capital they can invest in community development activities, including affordable housing through the LIHTC. The increase from 15 percent to 20 percent represents a 33 percent expansion of investment authority for banks hitting the cap. That sounds abstract. The financial impact is not. Based on industry estimates, the 5 percentage point increase in the PWI cap could unlock $5 billion to $10 billion in additional annual bank investment in affordable housing, depending on how much banks choose to deploy against their newly expanded authority.

The math becomes clearer when modeled against the LIHTC expansion requirements. If $5 billion to $7 billion is needed annually to finance 1.2 million additional units over the next decade, the PWI cap increase addresses roughly 70 to 100 percent of the incremental capital gap created by LIHTC expansion. That doesn’t mean the problem is solved entirely. Some of that $5 billion to $10 billion in newly available capacity will likely be deployed to existing projects rather than purely incremental deals. Banks may take only partial advantage of the expanded cap due to other capital constraints or portfolio positioning. The LIHTC expansion still needs complementary funding from other sources like HOME grants, CDBG funds, and state tax credits. But the magnitude of potential new capital is substantial enough to meaningfully move the needle.

Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition, articulated the urgency. She said “there are a number of banks that would like to invest more in the housing credit but have been constrained by this outdated cap.” More than 40 years of bank PWI growth has occurred within regulatory constraints that haven’t changed in twenty years. When the cap was last raised from 10 percent to 15 percent in 2006, national banks were investing $3.1 billion in PWIs. By 2024, that number had climbed to $27.9 billion. The cap increase from 15 percent to 20 percent is the first regulatory accommodation for that growth.

The impact on lenders isn’t automatic. The PWI cap increase creates authorization for new investment, not a mandate. Lenders must actively choose to reallocate capital from other community development categories into LIHTC. For banks already at their 15 percent cap, that reallocation means pulling resources away from small business lending, workforce development projects, or other community development investments to fund additional affordable housing. That’s a choice, not an inevitability. Banks facing capital constraints elsewhere in their portfolios may not deploy the full 5 percentage point increase into LIHTC. Lenders weighing returns across different investment categories may find other community development uses more profitable or strategically aligned. The Freddie Mac and Fannie Mae LIHTC investment caps were doubled to $2 billion each in January 2026 to address similar capacity constraints, but those government-sponsored enterprises, working through potential privatization transitions and internal staff changes, haven’t deployed meaningful capital against those expanded caps yet. The signal matters. The actual deployment of capital matters more. The PWI cap increase creates room. It doesn’t guarantee lenders will fill it with LIHTC investment.