Bramson: When deep affordability and tax cuts collide

I was at a community meeting in San Jose last month when a housing advocate passed around a photo of families in a newly built affordable complex. The smiles were real. Parents didn’t just gain housing — they gained hope, stability and a foothold in a place where the median home now hovers near $2 million.

Today, that kind of building seems a lot tougher to deliver.

With the passage of H.R.1 by Congress in July, many people in the housing field felt some reason to celebrate. On paper, the new bill offers quite a bit for housing: a permanent 12% boost to the 9% Low-Income Housing Tax Credit, a reduction in the bond-financing threshold for 4% credits from 50% to 25% and permanent authorization for the New Markets Tax Credit. Analysts say this could produce hundreds of thousands, even more than a million, affordable units across the country. At first glance, that sounds like the kind of sweeping action we’ve been waiting for.

But here in Silicon Valley, the reality is far more complicated. Even with expanded credits, building homes for families with extremely low incomes — the deeply affordable units we need most — still requires huge subsidies. Land and construction costs here are some of the highest in the nation, and without significant additional public investment, developers will still have to charge higher rents to make projects pencil out. The permanence of the New Markets Tax Credit is a win in theory, but in practice, slow approvals, complex financing rules and the way these deals get structured often keep them out of reach for smaller, mission-driven developers who focus on the lowest-income residents.

The reduced bond-financing requirement will help some projects cross the finish line, but it also lowers the bar. In some cases, it could lead to more projects that rely heavily on private capital, which often comes with pressure to raise rents over time. At the same time, the bill arrives as federal funding for HUD programs, community development block grants and other critical housing resources faces cuts. It’s a “two steps forward, one step back” situation, where expanded tax credits can’t fully counteract the loss of other supports.

In Silicon Valley, that gap is dangerous. More than 100,000 working families, seniors and disabled adults living here today earn 30% or less than the area median income. They are the ones at most at risk of displacement, and building for them often requires subsidies covering half to two-thirds of the total project cost — on top of any tax credit equity. Many of our existing deeply affordable homes are aging, with repair and maintenance needs the new tax credits don’t address. Without local funds to fill these gaps, we risk producing more “affordable” units that are out of reach for those who need them most.

We like to think of tax credits as a silver bullet, but in reality, they’re only one piece of a much larger puzzle. If we want this new measure to truly work for our region, we need to pair its incentives with serious local investment, public land and innovative housing policy. That means creating opportunities for new resources and county-level funding pools to support long-term operating subsidies, working with community lenders to bring down borrowing costs and committing to prioritize the lowest-income households in new development.

There are glimmers of hope right now, but hope alone doesn’t keep the lights on or the rent paid. In Silicon Valley, we know that stable housing is the foundation for everything else — health, education, public safety, economic growth. If we want those smiling families in San Jose to be more than a photo op, we have to make sure our tools match the scale of our crisis. That means turning tax credit potential into real homes for the people who need them most.

San José Spotlight columnist Ray Bramson is the chief operating officer at Destination: Home, a nonprofit that works to end homelessness in Silicon Valley. His columns appear every second Monday of the month. Contact Ray at [email protected] or follow @rbramson on X.