Key Points:

• Arizona’s affordable housing program may sunset in 2025

• Legislative Republicans request audit to assess program’s worth

• The state’s housing department expects 1,600 more units to be built

A state program intended to incentivize the development of affordable housing is scheduled to sunset at the end of 2025, and legislative Republicans are awaiting an audit to determine if it’s worth continuing in the future. 

Members of the Joint Legislative Audit Committee voted unanimously to approve a special audit from the Auditor General’s Office that will examine the Department of Housing’s Low Income Housing Tax Credit program, which will be included in the department’s regular sunset review.

The state program, modeled after the federal program that began in former President Ronald Reagan’s administration, was launched in 2022 to promote the development of affordable rental housing for low-income individuals and families by creating tax credits to incentivize housing developers to build affordable housing units. 

The audit committee’s chairman Rep. Matt Gress, R-Phoenix, said he’s not sure if the state program is worth continuing because it only accounts for 2.5% of total low-income housing tax credits in Arizona and hasn’t led to the creation of many units in the state.

The program was authorized in 2022, but the first housing units funded by tax credits opened in the state in 2024 due to the state’s three-year rolling budget. With state tax credits, more than 400 units have been completed in the past two fiscal years, according to annual reports from the housing department. 

“It represents a very tiny portion of the whole array of funding, and it does raise a question for me of whether this program is worth continuing on the state level given its insignificance,” Gress said.

Democrats on the committee greenlit the audit, defended the merits of the program, and asked their Republican colleagues not to be so hasty in deciding its fate with little data on the results it has produced. 

“Without LIHTC, multifamily developers have no incentive to provide affordable rental housing based on the land and building costs of today,” said Sen. Flavio Bravo, D-Phoenix. “I look forward to the study, but I don’t want to leave today with the unanimous view that it’s insignificant. I do believe it’s played a crucial role in our state.”

The Legislature did not renew funding for the state tax credit program in the recently enacted budget. The state funded it in 2024 with $4 million and renewing it was a goal for Gov. Katie Hobbs and several other Democrats in the Legislature. 

“We’re still in the infancy of this program,” said Rep. Stephanie Stahl Hamilton, D-Tucson.

Nicole Newhouse, executive director of the Arizona Housing Coalition, said many units have not yet been completed with state tax credits, and the housing department expects close to 1,600 units as a result of tax credits funded by the Legislature.

“It has actually produced a fair number of units for the state. I just think they were looking at what’s come online. Not what’s in the queue to come online,” Newhouse said. “Given the size of the program, the fact that it has 1,586 units and counting, I think it’s pretty good.”

Gress noted during the committee hearing that the program’s sunset date at the end of the year doesn’t mean that units will stop being built from tax credits since credits can be claimed for a 10-year period. 

Without any new allocations from the Legislature for new tax credits, any units built in future years would have to come from funding currently appropriated.

Many units developed from tax credits are intended for vulnerable populations, including older adults. Sen. Tim Dunn, R-Yuma, said several senior housing centers have been built in his district using low-income housing tax credits. However, he said he’s interested in seeing the results of the scheduled audit. 

A 2025 annual report from the Department of Housing notes that the state received $101 million in federal tax credits, which supported nearly 5,000 housing units in 2025.

“I’ve seen studies on this that show the low-income housing projects are already subsidized 90 cents on every dollar from government subsidies and I do see a role in trying to expand the housing stock, but we want to do it in the most efficient way possible and I think this review will help us understand how Arizona is running its low-income housing tax program,” Gress said.