A Federal Banking Rule Threatens New York Affordable Housing Investment
In the face of an ever-growing list of needs — from infrastructure and health care to public safety and education — and shrinking federal resources, it is clearer than ever before that New York state cannot solve its affordable housing crisis without private investment.
Yet a proposed federal banking rule threatens to weaken one of the most effective tools for accessing that private capital for affordable housing projects and make it harder to build and preserve the homes New Yorkers need.
The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are proposing changes to the Community Reinvestment Act (CRA), the landmark law that encourages banks to meet the credit needs of the communities they serve, including low- and moderate-income neighborhoods. As written, the proposal would remove an important incentive for banks with between approximately $1.65 billion and $10 billion in assets to invest in affordable housing through the federal Low-Income Housing Tax Credit (LIHTC), also known simply as the Housing Credit.
Carlina Rivera. Photo: Courtesy NYSASAF.
This may sound like a small technical change. The truth is, however, that the consequences of this proposal — should it be approved — would be far-reaching.
According to the state comptroller’s February 2024 report, New Yorkers in Need: The Housing Insecurity Crisis, approximately 2.9 million New York households spend at least 30 percent of their income on housing, and roughly one in five spends more than half, making them either rent burdened or severely housing cost burdened.
These families are already navigating a housing market where affordability is out of reach for too many. Meeting their needs requires sustained public investment, responsible development and a strong partnership with the financial institutions that help make construction and preservation possible.
The Housing Credit is central to that partnership. It is the nation’s largest source of financing for affordable rental housing, helping developers assemble the capital needed to build new homes and preserve existing affordable units.
In New York, its impact is substantial: Between 2010 and 2020, the program supported approximately 1,504 housing projects and nearly 160,000 housing units statewide, about 80 percent of them affordable to low-income households.
That said, these homes do not materialize through public funding alone. Housing Credit projects depend on private investors to provide equity that helps close financing gaps and make development financially feasible. Banks supply an estimated 75 to 80 percent of Housing Credit equity nationwide, and at least 71 percent of that investment is considered motivated, in part, by CRA considerations.
In other words, the CRA helps connect banks’ community investment obligations with a proven mechanism for delivering affordable homes. Weakening that connection risks undermining a financing system that communities across New York depend on.
The proposed changes are particularly concerning because regional and community banks play an important role in this market. An October 2026 survey by the Affordable Housing Tax Credit Coalition found that at least 108 banks with less than $10 billion in assets invested approximately $1.6 billion in Housing Credit equity over five years. Across the broader market, these institutions may have accounted for roughly $2 billion in equity during that period. Approximately one-third of the surveyed banks’ investments supported rural markets.
Here in New York, the affordable housing crisis is impacting every corner of the state — a fact too often overlooked as the five boroughs dominate the discussion. Regional banks help finance projects in smaller cities, towns and rural communities, where the pool of potential investors can be more limited. Losing even a portion of this investment could leave projects struggling to close their financing, and that would likely delay construction, complicate the preservation of existing housing and put additional pressure on already constrained public resources.
At a time when policymakers across New York are working to expand housing supply and preserve affordability, we should be strengthening the partnerships that make those goals achievable, not inadvertently weakening them through federal regulation.
The OCC and FDIC should revise their proposal to preserve a meaningful investment test for banks of all sizes, or adopt an equally effective alternative that maintains strong incentives to invest in affordable housing through the Housing Credit. A regulatory framework should recognize the real-world impact of these investments and the importance of maintaining a broad, competitive pool of private capital.
New York’s housing challenges demand action from every level of government and every sector of the economy. Financial institutions are indispensable partners in that effort. Federal regulators should ensure that the rules governing those institutions continue to encourage investment in the communities that need it most.
New York needs more housing, more preservation and more investment. We should not adopt federal rules that risk making any of those goals harder to achieve.
Carlina Rivera is president and CEO of the New York State Association for Affordable Housing and a former member of the New York City Council from Manhattan.
Source: commercialobserver.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.