The reduced private activity bond financing threshold—from 50% to 25% of aggregate basis—took effect January 1, 2026, unlocking significant additional 4% LIHTC production capacity.

What Changed:

• Previous threshold: 50% of aggregate basis in bond financing required
• New threshold: Only 25% bond financing needed for 4% LIHTC eligibility
• Result: Less bond volume cap consumed per project
• Impact: States can finance more deals with same allocation

State Implementation Approaches:

• California: Encouraging return of unused 2025 PAB allocations for redeployment
• Colorado: Phasing in threshold, starting at 45% upper limit for 2026 rounds
• Other states: Updating QAPs and application materials

Developer Implications:

• Acquisition-rehab deals can proceed with smaller bond issuances
• Improved project economics through reduced debt service
• New opportunities in bond-constrained states
• Work closely with bond counsel on state-specific requirements

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