Affordable Housing Bond Enhancement Act

Overview

• Bill: HR 7414
• Session: 119th Congress, 2nd Session
• Title: Affordable Housing Bond Enhancement Act

• Purpose: Amend the Internal Revenue Code of 1986 to expand and modify the use of mortgage revenue bonds (MRBs) and related housing financing tools to support affordable housing and home improvement activities.

• Introduced: February 9, 2026 by Rep. Rudy Yakym (with Rep. Gwen Moore as a co-sponsor)

• Referred to: House Committee on Ways and Means

Main purpose and intent

• The act seeks to broaden and streamline federal housing investment through MRBs and allied programs (mortgage credit certificates, qualified mortgage bonds, exempt facility bonds, etc.). It targets:
  • Increased flexibility and use of MRB carryforwards
  • Expanded financing for home improvements
  • Reforms to recapture/tax implications to improve housing financing outcomes
  • Enhanced reporting and transparency for bond usage
  • Extending and adjusting certain periods and eligibility related to mortgage credit certificates (MCCs)

Key provisions and changes

1. Reporting requirements for bond usage (Sec. 2)

   • Requires annual reporting to Congress on MRB-related activity by state and local issuing authorities.
   • Reports would include: state ceilings, carryforwards, total bond authority, private activity bonds issued (by purpose, including volume cap and carryforwards), expired carryforwards, and excess carryforward amounts.
   • Electronic reporting for issuers (Sec. 2(b)).
   • Confidential information disclosure authority to Secretary for volume cap reporting (Sec. 2(c)).
   • Effective date: calendar years beginning after enactment.

2. Use of carryforward bond authority (Sec. 3)

   • Modifies how carryforward authority can be used by issuing authorities.
   • Allows private activity bonds issued for a carryforward purpose within the next 3 calendar years to be limited to the amount of the carryforward, with transfers and redesignations governed within the state (and subject to state law restrictions, including for constitutional home rule cities).
   • Changes to elections under 146(f) to permit transfer or redesignation of carryforwards within a state for housing purposes.

3. Elimination of refinancing limitation for MRBs (Sec. 4)

   • Creates an exception for refinancing mortgages: refinancing a mortgage on a residence that meets certain principal residence and income tests will not be treated as a new acquisition or replacement for purposes of MRB limitations.
   • Special rule uses market value at refinancing for certain calculations.
   • Effective date: refinancing loans after enactment.

4. Increase in financing limit for qualified home improvement loans (Sec. 5)

   • Raises the financing limit from $15,000 to $75,000 for qualified home improvement loans under MRB-related provisions.
   • Inflation adjustment: the $75,000 limit would be adjusted annually after 2026 using the cost-of-living adjustment, with rounding to the nearest $100.
   • Effective date: loans made after the end of the calendar year including enactment.

5. Revision of recapture tax for MRBs (Sec. 6)

   • Updates the holding period percentage schedule for MRB recapture risk, with a 5-year framework (instead of longer timelines in some cases).
   • Aligns other subprovisions to reflect a shorter holding period and adjusts related conforming amendments.
   • Effective date: taxable years beginning after December 31, 2025.

6. Modifying calculation of credit for interest paid on certified indebtedness (Sec. 7)

   • Adjusts the computation of the MCC-related tax credit.
   • Sets a certificate credit rate range for MCCs (between 1% and 5% annually), and allows the issuer to specify different annual certificate credit rates for each year of the certificate’s term.
   • Reframes the MCC credit amount to focus on the average annual certificate credit rate rather than a fixed rate threshold.
   • Effective date: MCCs issued on or after the second calendar year beginning after enactment.

7. Extension of period for MCC to be in effect (Sec. 8)

   • Extends the window during which an MCC can be in effect from the second to the fourth calendar year that begins after enactment.
   • Applies to MCC limitations tied to nonissued bond amounts.

8. Extension of period to revoke election to issue MCCs (Sec. 9)

   • Allows an issuing authority to revoke its election to issue MCCs after the calendar year, but by not later than the end of the following calendar year.
   • Requires coordination with private activity bond carryforward rules to prevent circumvention.
   • Effective date: elections made after December 31, 2025.

9. Adjustment of public notice requirement (Sec. 10)

   • Reduces public notice requirement from 90 days to 30 days for MCC-related notices.
   • Effective date: notices provided after December 31, 2025.

10. Elimination of lender reporting requirement (Sec. 11)

    • Repeals lender reporting obligations under MCC programs, and harmonizes related tax reporting provisions (including Section 6709(c)).
    • Effective date: date of enactment.

Who and what is affected

• State and local bond issuing authorities (responsible for MRBs, MCCs, exempt facility bonds).
• Homeowners and homebuyers participating in MRB, MCC, and affordable housing programs.
• Lenders and financial institutions participating in MCCs (though lender reporting is removed under this bill).
• State governments, through carryforward and volume cap mechanics, and through potential transfers/redesignations within states.
• Federal budget and tax administration authorities (OCIO/Secretary) due to expanded reporting, disclosures, and authority to share volume cap data with congressional committees.

Procedural and timeline aspects

• Effective dates generally apply to calendar years beginning after enactment for most provisions.
• Several provisions apply to:
  • Elections under 146(f) after December 31, 2025 (Sec. 3).
  • Taxable years beginning after December 31, 2025 (Sec. 6).
  • MCCs issued after the first day of the second calendar year after enactment (Sec. 7).
  • Loans and public notices for MCCs after 2025 (Sec. 10).
  • Lender reporting changes take effect on enactment (Sec. 11).

Summary takeaway

The Affordable Housing Bond Enhancement Act broadens and modernizes the framework for using mortgage revenue bonds and related instruments to support affordable housing and home improvements. It emphasizes greater transparency through annual state-level reporting, expands the amount usable for home improvements, relaxes certain refinancing limitations, shortens holding periods for recapture, standardizes and broadens MCC credit parameters, extends MCC effectiveness, and simplifies lender reporting. These changes collectively aim to increase leveraged private activity bond capacity for affordable housing while improving administrative clarity and state flexibility.