Young Helps Reintroduce Tax Credit to Encourage Revitalization of Distressed Homes
WASHINGTON – U.S. Senators Todd Young (R-Ind.), Rob Portman (R-Ohio), and Ben Cardin (D-Md.) reintroduced their bill to revitalize housing in distressed neighborhoods nationwide. Currently, private development lacks in some urban and rural areas because the cost of purchasing and renovating homes is greater than the value of the sale price of homes. The Neighborhood Homes Investment Act (NHIA) creates a federal tax credit that covers the cost between building or renovating a home in these areas and the price at which they can be sold. The NHIA would also help existing homeowners in these neighborhoods to renovate and stay in their homes.
“The Neighborhood Homes Investment Act will help address the housing affordability crisis, create jobs, and encourage economic development during these tough times. By providing a tax credit to remove and redevelop abandoned buildings, we can incentivize more affordable housing to be constructed in areas that are in need of rehabilitation. This legislation will benefit many struggling communities in Indiana seeking to revitalize amid this pandemic,” said Senator Young.
The NHIA could lead to the revitalization of 500,000 homes and create $100 billion in development revenue over the next 10 years. About 22% of metro areas nationwide and 25% of non-metro areas qualify for NHIA investments. NHIA targets neighborhoods that have poverty rates that are 130% or greater than the metro or state rate; have incomes that are 80% or less that area median income; and have home values that are below the metro or state median value.
Other cosponsors of the bill include Senators Chris Coons (D-Del.), Tim Scott (R-S.C.), and Sherrod Brown (D-Ohio).
The full text of the bill can be viewed here.
Under this legislation, investors, not the government, bear the risk – credits would be received only after rehabilitation is completed and the property is occupied by an eligible homeowner. The Treasury Department is required to provide an annual report on the performance of the program.
NHIA will require that homes constructed or revitalized under the program must be sold to homeowners making less than 140 percent of the area median income. This ensures that improved housing directly benefits members of the communities targeted by the new tax credit. In addition, these credits are only eligible for houses constructed or revitalized in census tracts that meet certain minimum metrics related to median gross income, poverty rates, and home sale prices.
The credits would only be available after the homes have been completed and sold to a homeowner. NHIA targets neighborhoods that have poverty rates that are 130 percent or greater than the metro or state rate; have incomes that are 80 percent or less than area median income; and have home values that are below the metro or state median value.
The maximum credit amount is the lesser of 35% of total development costs (property acquisition plus construction and/or rehabilitation cost) or 80% of the national median home sale price. NHIA tax credits are awarded to project sponsors—developers, lenders, or local governments—through a competitive statewide application process administered by each state’s housing finance agency. Sponsors would use the credits to raise investment capital for their projects, and the investors could claim the credits against their federal income tax when the homes are sold and occupied by eligible homebuyers. State agencies would have annual allocation of either $6 per capita or $8 million, whichever is higher.
The Neighborhood Homes Investment Act is supported by the following organizations:
Center for Community Progress
Enterprise Community Partners
Habitat for Humanity International
Home by Hand
Housing Assistance Council
Housing Partnership Network
Local Initiatives Support Corporation
Low Income Investment Fund
Mortgage Bankers Association
National Association of Affordable Housing Lenders
National Alliance of Community Economic Development Associations
National Association of Hispanic Real Estate Professionals
National Association of Realtors
National Association of Real Estate Brokers
National Association of State and Local Equity Funds
National Association of the Remodeling Industry
National Council of State Housing Agencies
National Community Stabilization Trust
National Fair Housing Alliance
National Housing Conference
National NeighborWorks Association
Structured Finance Association
Up for Growth Action
Next Article Previous Article