U.S. House Reps. Mike Kelly (R-Pa.) and Brian Higgins (D-N.Y.) have introduced the Neighborhood Homes Investment Act that would produce 500,000 starter homes in underserved communities over the next 10 years.
As costs continue to rise and the supply of homes remains limited, the new tax incentive would address the needs of families throughout the country who are struggling to purchase homes.
"The United States is experiencing an affordable housing crisis, and my community of Western New York is not immune," says Higgins. "Older communities like Buffalo and Niagara Falls have aging homes with good bones, but the high cost to rehab these properties, compared to their value, causes them to fall into disrepair. As a result, neighborhoods are plagued by blighted homes and vacant lots. I am proud to join my colleagues in leading the bipartisan Neighborhood Homes Investment Act, which closes the value gap these neighborhoods face with a tax credit that encourages investments in single-family homes and leads to community revitalization. For the families whose dreams of homeownership feel unattainable, this legislation can be a game-changer."
The cost to build or rehab a home in many areas exceeds the price at which the home could be sold once completed. The new tax credit would help fill the gap—up to 35% of eligible development costs for new homes—which would reduce the developer’s risk of loss and encourage investments in new and rehabbed housing to make homeownership more feasible and support broader revitalization and economic development strategies in disinvested urban and rural communities.
"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," Kelly says. "This legislation creates stronger homes, stronger families, and stronger neighborhoods."
Under Neighborhood Homes, tax credits would be awarded to project sponsors through statewide competitions administered by state housing finance agencies. Sponsors could then use the credits to raise capital for projects, and investors could claim the credits against their federal income taxes. The credits could only be claimed for homes developed or rehabilitated in eligible low-income communities, and only after the homes are sold and occupied by lower or middle-income families.
The Neighborhood Homes Coalition estimates that the legislation could make a substantial economic impact over the next 10 years and the 500,000 homes that would be developed or rehabbed would spur $125 billion in total development activity; support 861,000 jobs in construction and construction-related industries; create $56 billion in wages and salaries; and produce $26 billion in federal and $12 billion in state and local tax revenues and fees.
"It is vital that we, as a country, make equitable investments in our housing infrastructure—both for the stability of our economy and the well-being of families and communities across the country," says Christopher Tyson, president of the National Community Stabilization Trust. "Neighborhood Homes encourages private investments in communities that would not otherwise have access to this kind of capital, creating new opportunities for families to put down roots in their own homes, strengthen their communities, and build wealth for the future."
Joining Kelly and Higgins as original co-sponsors of the legislation are Reps. Claudia Tenney (R-N.Y.), Dan Kildee (D-Mich.), Randy Feenstra (R-Iowa), and Dwight Evans (D-Pa.).