State-Level LIHTC and ADOH Renewal in the Budget Spotlight

As budget negotiations ramp up at the Capitol, two issues critical to Arizona’s housing future are drawing significant attention: the renewal of the Arizona Department of Housing (ADOH) and the continuation of the state-level Low Income Housing Tax Credit (LIHTC) program.

This session, ADOH underwent its scheduled sunset review amid heightened scrutiny. A recent Auditor General’s report identified multiple areas of concern, including a high-profile incident involving a phishing scam that diverted $2 million in grant funds. Although the department successfully recovered the funds through insurance, lawmakers on both sides of the aisle called for a closer review of agency operations.

In the House, Rep. David Livingston championed a one-year continuation of ADOH — an unusual move signaling a desire for stronger oversight. Sen. Tim Dunn advanced a four-year continuation in the Senate with added accountability measures. However, when Senator Dunn’s bill reached the House Appropriations Committee, Rep. Livingston amended it to reflect the shorter, one-year renewal along with additional conditions aimed at reinforcing fiscal safeguards. The proposal is now under negotiation as part of the overall budget package.

While the standard continuation period for agencies is eight years, a shorter renewal timeline reflects legislators’ intent to maintain ongoing oversight and review — a common practice when questions about agency operations arise.

At the same time, conversations are underway about the future of Arizona’s state-level LIHTC program, a key incentive driving affordable housing development statewide.

The state LIHTC was launched just a few years ago to complement the federal LIHTC program. The state program helped create more than 1,500 new affordable units across Arizona. In a state facing a critical housing shortage, the program has become an important tool for expanding options for working families, seniors, and veterans.

This session, Rep. Justin Wilmeth introduced legislation to extend the state LIHTC, but the bill did not receive a committee hearing — a reflection of broader budget negotiations rather than lack of legislative interest. Stakeholders anticipated that LIHTC would ultimately be addressed during budget talks, where it remains a top priority.

Without legislative action this year, the state-level LIHTC program will expire, making Arizona the first state in the nation to create and then sunset a state housing credit program. Federal LIHTC would still remain, but the loss of the state credit would remove a key catalyst for affordable housing development at a time when demand continues to surge.

Governor Katie Hobbs’ initial FY26 budget proposal included $10 million to continue the program — a significant commitment, as that initial allocation would unlock $500 million in credits over five years. Importantly, any general fund impact from the credits would not begin until 2027.

Rep. Livingston has publicly stated that extending the state LIHTC should remain a priority, and housing advocates are working closely with legislative leaders to highlight the program’s track record of success.

Currently, efforts are underway to secure support from a small group of Republican legislators who are interested in ensuring that a LIHTC continuation, paired with funding, is included in the final budget package.

What Does This Mean To You?

For Arizona’s housing industry, the state-level LIHTC program has proven to be a critical incentive — helping make affordable projects financially feasible in an environment where high land and construction costs can otherwise put developments out of reach. LIHTC has helped create opportunities for a range of projects across the state, from family housing to supportive housing for vulnerable populations.

The AMA will continue to work on behalf of preserving state-level LIHTC, given its usefulness as a tool to leverage private investment and public support for Arizona’s housing sector. We will keep you updated as the session moves towards its conclusion.