New ‘Neighborhood’ legislation could fuel home construction
Legislators in Washington have introduced a bill that could fuel residential construction in distressed and low-income neighborhoods.
A bipartisan group of U.S. Representatives and U.S. Senators have introduced the Neighborhood Homes Investment Act (H.R.3950/S.657), a bill that would create a single-family tax credit similar to the low-income housing tax credit (LIHTC). The act would help finance the new construction or acquisition and rehabilitation of owner-occupied homes in distressed neighborhoods.
An estimated 500,000 homes would be built or substantially rehabilitated and more than $125 billion of total development activity supporting 861,000 jobs in construction over the next ten years, according to the National Lumber and Building Material Dealers Association (NLBMDA).
The Neighborhood Homes Investment Act (NHIA) would create the Neighborhood Homes Tax Credit (NHTC), which is modeled after the low-income housing tax credit. The NHTC would be a federal tax credit that covers the gap between the cost of building or renovating a home and the price at which that home can be sold.
The NLBMDA said the credit would also help existing homeowners to rehabilitate their homes.
Through a new system, states would allocate the credit on a competitive basis and monitor its compliance. About 22% of metro areas nationwide and 27% of non-metro areas qualify for NHIA investments.
"The Neighborhood Homes Investment Act would help restore these communities by directing private capital into neighborhoods in low-income census tracts, bridging the gap between the cost of renovation and neighborhood property values,” said U.S. Senator Todd Young (R-IN). “This legislation also includes important guardrails to ensure that tax incentives target the families that need it most, continuing the work to avoid the negative and lasting consequences that a lack of safe, affordable housing has on Hoosier families.”
NHIA targets neighborhoods that have poverty rates that are at or below 130% or greater than the metro or state rate; have incomes that are at or below the area/state median income; and have home values that are below the metro or state median value.
“For too long, the cost of rehabilitating a home has been more expensive than simply starting from scratch. Now, the Neighborhood Homes Investment Act will allow homeowners and developers to more affordably restore beautiful homes and create more affordable housing in communities that need it the most,” U.S. Representative Mike Kelly (R-PA) said. “This legislation creates stronger homes, stronger families, and stronger neighborhoods.”
The NHTC would be exempt from the alternative minimum tax and would allow the use of the Sections 25C, 25D and 45L tax incentives for clean energy and energy efficiency improvement without penalty or basis reduction.
To qualify for the NHTC, homes must be in distressed areas (as defined in the statute as areas with high poverty rates, low median family incomes and low home values) where private sector involvement is needed.
The NLBMDA wants members to contact their elected officials in Congress and ask them to support and cosponsor the Neighborhood Homes Investment Act.
