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Proposed Tax Credit Bill Would Spur Creation of 500,000 Affordable Homes: Nonprofit

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A coalition of nonprofits, industry trade groups, and state housing agencies is calling on Congress to pass a federal tax credit that would support the creation of 500,000 starter homes in low-income areas.

In a letter (pdf) to U.S. House and Senate leaders dated Nov. 28, the nonprofit Neighborhood Homes Coalition urged lawmakers to pass the Neighborhood Homes Investment Act by the end of the year, arguing that a shortage of affordable starter homes is helping fuel inflation and rising housing costs.

Introduced in the House and Senate last year, the bill creates a tax credit that would fund part of the development costs to build or rehabilitate half a million homes over the next decade. The program would focus on developing modestly priced, single-family homes in struggling neighborhoods with high poverty rates and dilapidated housing.

State housing finance agencies would administer the new tax credits through a competitive application process. Investors would receive credits only after the project is completed and the home is occupied by a qualified homeowner. The credit would only cover the shortfall between the market value of the home and the cost of development, so if a home sold for more than the development cost, the investor wouldn’t get the credit.

The bipartisan legislation has attracted support from 100 House members and 24 senators, according to a statement by the Neighborhood Homes Coalition. Rep. Brian Higgins (D-N.Y.) authored the House legislation, while Senators Ben Cardin (D-Md.) and Rob Portman (R-Ohio) introduced the companion bill in the Senate. The House included the legislation in its revised, $1.85 trillion Build Back Better act, which collapsed after Sen. Joe Manchin withdrew his support in December 2021.

The Neighborhood Homes Coalition is an advocacy group composed of 36 national organizations, including the American Bankers Association, the Mortgage Bankers Association, and the National Council of State Housing Agencies. The coalition argued in its letter to lawmakers that the proposed bill would address a range of economic, racial justice, and climate goals, noting that the program would encourage “energy-efficient investment” and that 63 percent of the census tracts eligible for the tax credits under the bill are “majority minority.”

The program would foster $100 billion in new investment, create nearly 800,000 new jobs, and generate $29 billion in tax revenue for federal, state, and local governments, which is more than its federal budget coast, the coalition claimed.

Separately, 54 members of Congress led by Representatives Suzan DelBene (D-Wash.) and Brad Wenstrup (R-Ohio) wrote a letter to House leadership calling for new provisions to expand the Low-Income Housing Tax Credit (LIHTC) in the proposed Affordable Housing Credit Improvement Act. The additional resources for LIHTC, a federal incentive program used to finance low-income housing, would support the building or preservation of more than 1.5 million affordable homes, the lawmakers said.

Greg Isaacson

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Greg Isaacson spent 7 years in China and Thailand researching and reporting on business and real estate in Asia, with a focus on commercial real estate in Chinese-speaking markets as well as outbound investment from China. He has also worked as a real estate research analyst in Chicago and a real estate reporter in New York.



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