H.R. 2038 — American Housing and Economic Mobility Act of 2025

This section establishes a competitive grant program, to be administered by the Secretary of Housing and Urban Development (HUD) not later than one year after enactment, under which states, units of general local government, and Indian tribes may receive grants to reform local land use restrictions and remove barriers to affordable housing production. Grant funds may be used for (1) any activities authorized under section 105 of the Housing and Community Development Act of 1974 (i.e., Community Development Block Grant-eligible activities); (2) any activities permitted under the Local and Regional Project Assistance Program (49 U.S.C. §6702, i.e., transportation infrastructure grants); or (3) modernizing, renovating, or repairing facilities used by public elementary schools, public secondary schools, and public institutions of higher education (as defined in the Higher Education Act of 1965, 20 U.S.C. §1001), including for physical, sensory, and environmental accessibility consistent with a recognized green building rating system. Grant applications must demonstrate that the applicant has carried out, or is carrying out, initiatives to expand well-located affordable housing supply—including by-right development, reduced off-street parking requirements, incentives for redeveloping vacant land, revised lot sizes and multifamily limits, density bonuses, inclusionary zoning, streamlined regulations, accessory dwelling units, local tax incentives, and tenant protections (e.g., right to counsel, just-cause eviction, rent stabilization, anti-harassment measures)—but excluding changes to wage, leave, safety, prevailing wage, anti-discrimination, or labor organizing laws; applications must also describe alignment with the applicant's HUD consolidated plan. All construction labor on grants is subject to Davis-Bacon prevailing wage requirements (40 U.S.C. ch. 31, subch. IV). This section authorizes appropriations to carry out the program.

This section authorizes appropriations for multiple affordable housing programs and makes targeted FY2025 appropriations for others, as follows: (1) $48 billion annually for the Housing Trust Fund (12 U.S.C. 4568(a)) for FY2025 through FY2034, which provides formula grants to states to increase and preserve rental housing and homeownership opportunities for extremely low- and very low-income families (including homeless families); (2) $3 billion annually for the Capital Magnet Fund (12 U.S.C. 4569) for FY2025 through FY2034, which awards competitive grants to nonprofits and community development financial institutions to develop affordable housing; (3) $70 billion for the Public Housing Capital Fund (42 U.S.C. 1437g(c)(2)(A)) for FY2025, which provides formula allocations to public housing agencies for capital and management improvements to public housing serving low-income families, elderly persons, and persons with disabilities; (4) for the Indian Housing Block Grant program (25 U.S.C. 4117), $2.5 billion for FY2025 and such sums as necessary for FY2026 through FY2034 (replacing prior authorization of such sums as necessary for FY2009 through FY2013), which provides formula block grants to tribes for affordable housing activities; (5) for the Native Hawaiian Housing Block Grant program (25 U.S.C. 4243), $50 million for FY2025 and such sums as necessary for FY2026 through FY2034 (replacing prior authorization of such sums as necessary for FY2001 through FY2005), which provides block grants to support Native Hawaiian housing development; (6) for FY2025 rural housing programs under the Housing Act of 1949, $420 million for section 502 direct loans (42 U.S.C. 1472) to very low-income households for homeownership, $54 million for section 514 farm labor housing loans (42 U.S.C. 1484), $420 million for section 515 rural rental housing loans for elderly and disabled persons (42 U.S.C. 1485), $75 million for section 516 farm labor housing grants (42 U.S.C. 1486), $75 million for section 523 self-help housing grants (42 U.S.C. 1490c), and $240 million for the Multifamily Preservation and Revitalization Demonstration Program; and (7) establishes the Middle Class Housing Emergency Fund, to award competitive grants to state housing finance agencies in states with shortages of affordable rental or for-sale housing where median rents or home prices have risen substantially faster than area median income over the prior five years. Grants may fund nonprofit acquisition or construction of housing affordable to households at or below 120% of area median income or tenant protections such as legal aid against eviction and emergency rental assistance (with Davis-Bacon prevailing wage requirements).

This section states congressional findings on the homeownership benefits provided by the Federal Housing Administration (FHA), Federal National Mortgage Association (Fannie Mae), and Federal Home Loan Mortgage Corporation (Freddie Mac) and declares the purpose of preserving FHA-insured owner-occupied homes through targeted sales of real estate-owned (REO) properties and non-performing loans. The section amends Title II of the National Housing Act (12 U.S.C. 1707 et seq.) by adding section 259, which requires the Secretary of Housing and Urban Development (HUD), not later than one year after enactment, to (1) develop FHA programs ensuring that at least 75% of single-family REO properties (acquired after foreclosure or via the Claim Without Conveyance of Title program) are sold directly to owner-occupants or to community partners (i.e., HUD-approved nonprofits) for rehabilitation and resale to owner-occupants; and (2) establish guidelines for the Claim Without Conveyance of Title program providing an exclusive bidding period for governmental entities, HUD-approved nonprofits, and owner-occupants. Section 259 further prohibits FHA REO purchasers from reselling via land installment contracts or similar non-title-transfer mechanisms within 15 years absent prior HUD approval (anti-predatory lending provision). The section also adds section 260, which generally prohibits HUD from selling or transferring non-performing FHA-insured single-family mortgages except when the Mutual Mortgage Insurance Fund's capital level is substantially below the ratio required by section 205(f)(2), after certifying no other restoration measures are available, and limiting sales to the amount necessary. For any such sale, HUD must provide 90 days' certified mail notice to borrowers and property owners detailing loss mitigation options, servicer actions, and appeal procedures (with judicial review available under the Administrative Procedure Act); prohibit non-performing loan auction sales until notice-and-comment rulemaking on loan selection, borrower notice, loss mitigation review, bidder eligibility, purchaser guidelines, and reporting; and require lender/servicer certification of compliance as a condition for FHA insurance claims.

This section establishes a Down Payment Assistance Program, administered by HUD through a new Treasury fund, to provide grants of up to 3.5% of a property's appraised value (or 3.5% of the maximum FHA principal obligation limit under 12 U.S.C. 1707 et seq. if the appraised value exceeds that limit) to eligible first-time, first-generation homebuyers for principal residence purchases. Eligible residents are first-time homebuyers (i.e., no principal residence ownership in the prior three years, excluding heir property or divorce-related surrender) who are also first-generation homebuyers (i.e., self-attested lack of parental principal residence ownership and no spousal/domestic partner ownership in prior three years, excluding heir property) with incomes below 120% of area median income (or 140% in high-cost areas); grants do not require an FHA-insured mortgage and may be layered with other assistance. The fund also supports outreach to financial institutions and eligible residents, HUD-approved homebuyer counseling, and recordkeeping. This section (1) appropriates such sums as necessary for FY2025 through FY2034; (2) requires HUD to issue regulations within one year of enactment, including disbursement methods allowing lender reimbursement or preapproval and eligibility verification processes; (3) amends the Real Estate Settlement Procedures Act (12 U.S.C. 2604(b)) to require program information in homebuying booklets; and (4) amends the National Housing Act (12 U.S.C. 1709(f)(1)) to include the program among designated mortgage products.

This section establishes a formula grant program administered by the Secretary of Housing and Urban Development (HUD) to provide funding to states for neighborhoods with an appraisal gap (i.e., census tracts where the median sales price of a dwelling unit is lower than the median cost to acquire and rehabilitate, or build, a new dwelling unit), including support for borrowers with negative equity in their primary residence. Grants may be used (1) to provide funds to borrowers to pay down arrears on affordable loans; pay down arrears or principal to qualify for loan modifications; pay off or pay down second mortgages or home equity lines of credit; pay off small-dollar mortgages; pay delinquent taxes, tax liens, water or sewer bills, or liens; or pay for home repairs, maintenance, or modifications to meet applicable codes; and (2) for programs to purchase or rehabilitate vacant or distressed properties to enhance neighborhood property values. HUD must distribute funds to states based on (1) the number of borrowers with primary residences having negative equity in each state and (2) each state's share of neighborhoods with an appraisal gap. The section authorizes $5 billion for FY2025.

This section cites itself as the "Community Reinvestment Reform Act of 2025" and revises the findings and purpose of the Community Reinvestment Act of 1977 (CRA)—which requires federal banking regulators to assess institutions' records of helping meet the credit needs of their entire communities, including low- and moderate-income neighborhoods—to expand the scope of institutions' obligations to include deposit services, transaction services, other financial services, and community development loans and investments in all local communities where they are chartered or do business, including those where they make loans without accepting deposits or accept deposits without making loans. It further directs appropriate Federal financial supervisory agencies to ensure institutions meet those credit and other financial needs consistent with safe and sound operations. The section also replaces CRA definitions with new ones, including (1) "application for a deposit facility," listing six types of applications requiring approval (e.g., charters, deposit insurance, branches, mergers); (2) "appropriate Federal financial supervisory agency," incorporating the Bureau of Consumer Financial Protection (CFPB) for supervised covered persons; (3) "assessment area," expanding to communities with deposit-taking branches, ATMs, retail offices, agents, or significant loan/product originations; (4) "climate resiliency and disaster mitigation," for activities aiding low- and moderate-income or climate vulnerable communities in preparing for climate/natural disasters without forced relocation, tied to government or nonprofit plans; (5) "climate vulnerable communities," those with heightened climate risks and limited adaptation resources; (6) "community benefits plan," for measurable goals on loans, investments, services, and products to low- and moderate-income or underserved communities; and (7) "community development," adding affordable housing preservation, integration activities, economic development for small businesses/farms, and other specified activities. (Thus, these changes extend CRA assessments to CFPB-supervised nonbanks, digital lenders without branches, and climate-focused activities.)

This section amends the Federal Credit Union Act to facilitate Federal credit union service in underserved areas by (1) defining an "underserved area" in section 101(10) as a local community, neighborhood, or rural district that is an investment area under the Community Development Banking and Financial Institutions Act of 1994 (meeting additional NCUA Board requirements) and underserved by other depository institutions (based on data from the NCUA Board and federal banking agencies), or—for an existing Federal credit union—any geographic area previously approved as underserved with a service facility established before enactment; (2) requiring in new section 106(b) that the NCUA Board monitor Federal credit union adherence to significant unmet needs plans submitted under section 109(h); and (3) in section 109, revising subsection (c)(2) to allow Board approval of expanded membership to include residents or businesses in an underserved area if the credit union is well capitalized or adequately capitalized (as defined in section 216(c)(1)) and establishes ongoing services within 24 months (with automatic termination for noncompliance or failure to meet the unmet needs plan, plus credit union reporting on members, facilities, and plan compliance during examinations and annual NCUA publication of related data), cross-referencing this exception in subsection (e)(2), and adding subsection (h) to require community credit unions (under subsection (b)(3)) to submit a business plan with a marketing plan addressing demographic needs (especially underserved groups) and—for proposed areas spanning multiple jurisdictions with populations of 2,500,000 or more—public notice, comment, and hearing. The section further directs the NCUA Board to issue implementing regulations within one year of enactment. (As background, field-of-membership restrictions generally limit Federal credit unions to specific groups such as employees or residents of a defined area; the underserved area exception, in place since 1998, enables broader community charters to promote financial inclusion where other institutions are lacking.)

This section raises the aggregate limits on public welfare investments—direct or indirect investments promoting the public welfare by primarily benefiting low- and moderate-income communities or families (e.g., by providing housing, services, or jobs)—for national banks and state member banks from 5% of capital stock actually paid in and unimpaired plus 5% of unimpaired surplus to tiered limits based on capitalization status, prohibits investments exposing the bank to unlimited liability, requires the primary regulator to limit per-project investments and approve exceptions, and applies limits to both direct investments and those by subsidiaries. (As background, these investments support community development consistent with the Community Reinvestment Act of 1977 objectives.) (1) For national banks, it revises 12 U.S.C. 24 (Eleventh) to limit non-well capitalized banks to 5% capital plus 5% surplus (increasable by Comptroller of the Currency order to 15% capital plus 15% surplus if no significant risk to the deposit insurance fund and adequately capitalized) and well capitalized banks to 15% capital plus 15% surplus (increasable to 25% capital plus 25% surplus under similar Comptroller order). (2) For state member banks, it revises 12 U.S.C. 338a to impose parallel limits (subject to state law), with the 15% and 25% tiers available only to well capitalized banks with satisfactory or outstanding Community Reinvestment Act examination ratings and increasable by Federal Reserve Board order if no significant risk to the deposit insurance fund.

This section establishes temporary eligibility for VA-guaranteed home loans for direct descendants (including legally adopted descendants) of deceased veterans who served on active duty from June 22, 1944, to April 11, 1968, and did not receive such a loan benefit during their lifetime, provided the descendants are first-time homebuyers, first-generation homebuyers (as defined in section 201(a) of the American Housing and Economic Mobility Act of 2025), and living on the enactment date of that Act. (As background, the VA home loan guaranty program under 38 U.S.C. chapter 37 insures mortgages for eligible veterans and servicemembers, enabling favorable loan terms such as no down payment.) The eligibility applies during a period beginning one year after enactment of this Act and ending 10 years after the Secretary of Veterans Affairs (VA) issues required implementing regulations, which VA must prescribe within 180 days of enactment to address incomplete records and multiple eligible descendants per veteran.

This section amends the Fair Housing Act (42 U.S.C. 3601 et seq.) to expand prohibited bases of discrimination in the sale, rental, financing, and brokerage of dwellings and related real estate practices to include (1) actual or perceived race or color; and (2) sex (including sexual orientation and gender identity), marital status, source of income, and veteran status. It adds corresponding definitions to section 802, including for gender identity (i.e., gender-related identity, appearance, mannerisms, or characteristics regardless of designated sex at birth); marital status (as defined in 12 C.F.R. § 202.2 or successor); sexual orientation (i.e., homosexuality, heterosexuality, or bisexuality); source of income (i.e., reasonably expected continuing income from employment, government/private assistance such as section 8 vouchers, gifts/inheritances/pensions, or property sales); and veteran status (i.e., uniformed services member per 10 U.S.C. § 101 or veteran per 38 U.S.C. § 101). The section makes parallel expansions and "actual or perceived" insertions in sections 804, 805, and 806; in section 808(e)(6); and in the intimidation provision (42 U.S.C. § 3631); and adds exceptions in section 804(c) authorizing veteran-specific loan programs and federal housing assistance such as section 8 non-discrimination waivers (42 U.S.C. § 1437f(o)(19)) and VA Homeless Providers Grant and Per Diem. A rule of construction clarifies that the amendments do not imply prior lack of protection for these classes under prior law.

This section exempts tenant-based assistance under Section 8(o) of the United States Housing Act of 1937 (i.e., Housing Choice Vouchers) for Indian housing from the termination of financial assistance and use restrictions otherwise applicable after September 30, 1997, under Section 502 of the Native American Housing Assistance and Self-Determination Act of 1996 (25 U.S.C. 4181). (As background, Section 502 terminated most ongoing assistance under the 1937 Act for Indian housing developed or operated by Indian housing authorities after FY1997 to transition such housing to NAHASDA block grants; this change preserves voucher flexibility for tribes.)(1) It further revises Section 8(q)(2)(B) of the 1937 Act to authorize supplemental administrative fees for public housing agencies (PHAs) to cover the cost of assisting families with children or a member with a disability to move to lower-poverty, higher-opportunity neighborhoods, as determined by HUD using objective, evidence-based criteria. The section also adds a new Section 8(o)(23) to the 1937 Act requiring PHAs administering vouchers in metropolitan areas to (1) conduct a location analysis at least every five years—coordinated regionally and using HUD mapping tools based on demographic data—to assess and address disparities in voucher holders' access to higher-opportunity neighborhoods likely to improve outcomes for children, adults with disabilities, and other protected groups; (2) develop and include in administrative plans regional policies to reduce barriers; and (3) have performance measured by HUD under existing assessment regulations. Finally, it directs HUD, not later than one year after enactment, to establish policies enabling non-Moving to Work PHAs in consortia under Section 13(a) of the 1937 Act to consolidate funding contracts for Section 8(o) vouchers and Sections 9(d) and (e) public housing capital and operating funds into single contracts.

This section provides that, except as otherwise expressly provided, amendments and repeals in this title refer to provisions of the Internal Revenue Code of 1986.

This section revises the federal estate tax, which applies to the taxable value of a decedent's estate exceeding the basic exclusion amount, as follows: (1) replaces the rate table in IRC §2001(c) with rates of 55% on amounts up to $13 million, 60% on the excess over $13 million up to $93 million, and 65% on the excess over $93 million (previously up to 40%); (2) reduces the basic exclusion amount to $3.5 million (from $13.61 million in 2024); and (3) imposes a 10% surtax on the applicable amount—defined as the sum of certain components used in computing the tax under IRC §2001(b)(1)(A) and (B)—for estates where that amount exceeds $1 billion. The changes apply to estates of decedents dying, generation-skipping transfers, and gifts made after enactment.

This section establishes additional requirements under IRC section 2702(b) for a grantor retained annuity in a grantor retained annuity trust (GRAT)—i.e., to qualify for non-zero valuation of the retained interest for gift tax purposes—including (1) a minimum term of 10 years, (2) annual fixed amounts that do not decrease during the first 10 years of the term, and (3) a remainder interest valued at 10% or more of the assets transferred to the trust as of the transfer date. The amendments apply to transfers made after the date of enactment.

This section establishes new IRC §2901, applying estate and gift tax rules to specified portions of grantor trusts (i.e., trusts where the grantor or another person is treated as owner for income tax purposes under IRC §§671-679 but previously not for transfer taxes). Specifically, for applicable trust portions—(1) those where the grantor is deemed owner, and (2) those attributable to post-enactment sales, exchanges, or comparable transactions by a non-grantor deemed owner disregarded for income tax—(A) assets are included in the deemed owner's gross estate at death, (B) lifetime distributions to beneficiaries are treated as taxable gifts, and (C) assets are treated as a taxable gift if the deemed owner ceases to be owner during life (with reduction for the deemed owner's prior taxable gifts to the trust and exceptions for trusts already includible in the estate or determined not to have tax avoidance as a significant purpose); the tax liability falls on the trust. The provision applies to trusts created on or after enactment, contributions to pre-enactment trusts made on or after enactment, and qualifying transactions involving pre-enactment trusts occurring on or after enactment. (Thus, it largely closes the "grantor trust loophole" by subjecting grantor trust assets and related transactions to estate and gift taxes previously avoided.)

This section establishes new IRC §2642(h), which eliminates the generation-skipping transfer (GST) tax exemption by setting the inclusion ratio to 1 for (1) any direct skip or taxable distribution to a non-exempt person, (2) any taxable termination occurring immediately after no exempt person is a beneficiary of the trust. An exempt person is a natural person assigned to a generation 2 or fewer generations below the transferor or whose date of birth precedes the trust's creation date (with pre-2026 trusts deemed created on January 1, 2026, and special rules for pour-over trusts carrying back the transferor trust's creation date), or a trust with all interests held by such persons (disregarding interests used primarily to postpone or avoid these rules). (Thus, the GST tax—which applies to transfers skipping one or more generations, such as to grandchildren or further descendants, with an exemption that can otherwise shelter up to $13.99 million per transferor in 2025—applies fully to transfers to more remote descendants or beneficiaries born after a trust's creation date.) Generation assignment rules of IRC §2653(a) do not apply, and the Secretary of the Treasury may issue regulations. The section also repeals Section 1433(b)(2) of the Tax Reform Act of 1986. These changes apply to GSTs made after the date of enactment.

This section revises the annual gift tax exclusion under IRC §2503(b) (which permits a donor to exclude the first $10,000—indexed for inflation, or $18,000 in 2024—of gifts, other than future interests, per donee per calendar year from the taxable gifts calculation). It (1) establishes a per-donee exclusion limit of $10,000 for gifts to any person and (2) caps the aggregate exclusion under that limit, for illiquid transfers by the donor (i.e., transfers in trust; of passthrough entity or nonsaleable interests; or of other property not immediately liquidatable by the donee), at twice the per-donee amount (i.e., $20,000). The section also strikes §2503(c), which treats certain transfers for the benefit of minors under age 21 as present interests qualifying for the exclusion. (Thus, annual exclusions for illiquid gifts such as to trusts are newly subject to a donor-wide cap, and minors' gifts lose their special qualification.) The changes apply to calendar years beginning after enactment.

This section disallows a step-up in basis under IRC §1014 (which generally adjusts the basis of property acquired from a decedent to fair market value at death) for property transferred after enactment to a grantor trust (i.e., one where the transferor is treated as owner for income tax purposes under IRC §§671-679) if the property is not includible in the transferor's gross estate for estate tax purposes. (Thus, the donee or trust retains the transferor's original basis, potentially increasing capital gains tax on later sale.) A conforming amendment updates a cross-reference in IRC §6662(k), and the changes apply prospectively with no inference for prior transfers.

This section establishes new IRC §2705 limiting valuation discounts for transfers of non-actively traded interests (within the meaning of IRC §1092) in entities. Specifically, subsection (a) prohibits any discount—due to lack of control by the transferor or transferee, lack of marketability, or any other reason—when the transferor, transferee, and their family members (as defined in IRC §2704(c), with attribution under IRC §2701(e)(3)) control the entity immediately before the transfer. (Thus, such transfers for gift, estate, and generation-skipping transfer tax purposes receive no valuation discounts based on those factors.) Subsection (b) requires that, for such transfers, (1) nonbusiness assets held by the entity be valued as if transferred directly to the transferee without discount, and (2) those assets be excluded from the value of the transferred entity interest. Nonbusiness assets are those not used in the active conduct of a trade or business, including passive assets (e.g., cash, stocks, debt, derivatives, real property used in rental businesses, royalties other than from patents, commodities, collectibles) unless qualifying exceptions apply (e.g., certain IRC §1221(a) property, working capital, or real property in which the transferor materially participates under modified IRC §469 rules); a look-thru rule applies to disregard 10%-or-greater interests in lower-tier entities. The section makes conforming amendments to IRC §2031(b) and the table of sections for chapter 14, and applies to transfers after enactment.

This section establishes a new tax surcharge on estates and trusts equal to (1) 5% of modified adjusted gross income exceeding $200,000 plus (2) 3% of such income exceeding $500,000, for taxable years beginning after enactment. Modified adjusted gross income means adjusted gross income (determined under IRC §67(e) and reduced by charitable deductions under §642(c)) minus deductions for investment interest (§163(d)) or business interest (§163(j)); the surcharge does not apply to charitable trusts and is excluded from specified credits and the alternative minimum tax. The section makes conforming amendments to coordinate the surcharge with (1) interest on deferred tax liability (§453A); (2) foreign tax credit limitations (§904); (3) individual elections for corporate rates (§962); (4) interest on tax deferrals (§1291); (5) withholding on foreign partners' income (§1446); (6) partnership adjustments (§6225); and (7) required payments for certain entities (§7519). (Thus, in each case, the highest individual tax rate for estates and trusts is treated as increased by the surcharge rates of 5% and 3%.)

This section increases the maximum aggregate value of qualified real property (i.e., farmland, ranchland, or closely-held business real property) eligible for special use valuation under the estate tax—from $750,000 to $3 million—and updates the inflation adjustment base year to calendar year 2026 (from 1998) with a reference year of calendar year 2025 (from 1997). (As background, special use valuation permits estates to value such property at current use rather than fair market value to reduce estate tax liability and avoid forced sales; the changes apply to decedents dying, and gifts made, after December 31, 2025.)

This section modifies the estate tax exclusion for land subject to qualified conservation easements (i.e., perpetual restrictions on real property development to preserve farmland, open space, or wildlife habitat) by (1) increasing the maximum exclusion amount to $2,000,000 (from $500,000), and (2) increasing the applicable percentage of the land's value eligible for exclusion to 60% (from 40%). The amendments apply to estates of decedents dying, and gifts made, after December 31, 2025.

This section doubles the number of dwelling units required to be accessible—from the amounts otherwise required under HUD regulations at 24 C.F.R. §§ 8.22 and 8.23—in housing constructed, altered, or assisted using HUD funds provided under this Act or its amendments. (As background, those regulations implement Section 504 of the Rehabilitation Act of 1973 by generally requiring 5% of units in covered multifamily housing to be accessible for persons with mobility impairments and 2% for persons with hearing or visual impairments.)