With growing needs in areas such as infrastructure, healthcare, public safety, and education, coupled with shrinking federal funds, it is increasingly clear that New York State cannot solve its affordable housing crisis without private investment. However, a proposed federal bank regulation threatens to weaken one of the most effective tools for accessing this private capital for affordable housing projects, making 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 amendments to the Community Reinvestment Act (CRA). This landmark legislation encourages banks to meet the credit needs of the communities they serve, including low and moderate-income neighbourhoods. The draft of the proposed changes would eliminate a key incentive for banks with assets between approximately US$1.65 billion and US$10 billion to invest in affordable housing via the federal Low-Income Housing Tax Credit (LIHTC), also known as the Housing Credit.
Far-reaching Consequences for New York
While this may sound like a minor technical change, the consequences of this proposal – should it be approved – would be far-reaching. A February 2024 State Comptroller report titled “New Yorkers in Need: The Housing Insecurity Crisis” found that approximately 2.9 million households in New York spend at least 30 percent of their income on housing, and about one in five households spend more than half, making them either rent-burdened or severely housing-cost burdened. These families are already navigating a housing market where affordable housing is out of reach for many.
Meeting these needs requires sustained public investment, responsible development, and a strong partnership with the financial institutions that facilitate construction and preservation. The Housing Credit is central to this partnership. It represents the nation's largest source of financing for affordable rental housing, helping developers secure the capital needed to build new homes and preserve existing affordable units. In New York, its impact is significant: between 2010 and 2020, the programme supported approximately 1,504 housing projects and nearly 160,000 housing units across the state, with about 80 percent of these being affordable for low-income households.
However, these homes are not created by public funding alone. Projects utilising the Housing Credit rely on private investors to provide equity that bridges financing gaps and makes development financially viable. Banks provide an estimated 75 to 80 percent of the equity for Housing Credits nationwide, and at least 71 percent of these investments are partly motivated by CRA considerations. In other words, the CRA links banks' community investment obligations with a proven mechanism for delivering affordable housing. Weakening this link risks undermining a financing system that communities across New York depend on.
The Role of Regional Banks and Necessary Adjustments
The proposed changes are particularly concerning because regional and community banks play a vital role in this market. An October 2026 survey by the Affordable Housing Tax Credit Coalition found that at least 108 banks with less than US$10 billion in assets invested approximately US$1.6 billion in Housing Credit equity over five years. Across the entire market, these institutions could have contributed around US$2 billion in equity during that period. About one-third of the surveyed banks' investments supported rural markets.
In New York, the affordable housing crisis affects every corner of the state – a fact often overlooked as the five boroughs dominate the discussion. Regional banks help finance projects in smaller cities, towns, and rural areas where the pool of potential investors may be more limited. The loss of even a portion of these investments could cause projects to struggle to secure their funding. This would likely delay construction, hinder the preservation of existing housing, and place additional pressure on already scarce public resources.
At a time when policymakers across New York are working to expand housing supply and preserve affordability, the partnerships that make these goals achievable should be strengthened, rather than inadvertently weakened by federal regulation. The OCC and FDIC should revise their proposal to retain a meaningful investment test for banks of all sizes or adopt an equally effective alternative that maintains strong incentives for affordable housing investments through the Housing Credit. A regulatory framework should recognise the real-world impact of these investments and the importance of maintaining a broad, competitive pool of private capital.
New York's housing plight requires action from every level of government and every economic sector. Financial institutions are indispensable partners in these efforts. Federal regulators should ensure that the rules governing these institutions continue to foster investment in the communities that need it most. New York needs more housing, more preservation, and more investment. No federal rules should be enacted that could make achieving these goals more difficult.
