On March 7, 2023, U.S. Senators Ben Cardin (D-Maryland) and Todd Young (R-Indiana), both members of the Senate Finance Committee, introduced bipartisan legislation to revitalize housing in distressed neighborhoods nationwide.
Original cosponsors include Finance Committee Chair Ron Wyden (D-Oregon), as well as Senators Jerry Moran (R-Kansas) and Sherrod Brown (D-Ohio), Chair of the Committee on Banking, Housing and Urban Affairs.
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.
“Everyone deserves a safe and affordable place to call home. Our bipartisan tax credit will drive housing investments and revitalize neighborhoods across Maryland while keeping them affordable for low- and moderate-income families,” said Senator Cardin.
“This credit will allow individuals in these communities to build equity and wealth for their families. We must continue to make it more attractive to invest in the communities that need it most,” he added.
The legislation also caps the price of sales for each home to ensure that they are affordable housing options in the community. The NHIA would also help existing homeowners in these neighborhoods to renovate and stay in their homes.
“Across Indiana, we have seen once-vibrant neighborhoods struggle under poor economic conditions and lack of investment. 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 Senator Young.
“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,” he continued.
The NHIA could lead to the revitalization of 500,000 homes and create $125 billion in development revenue over the next 10 years. About 22% of metro areas nationwide and 27% of non-metro areas qualify for NHIA investments.
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.
“This bill takes a targeted approach to drive private investments in safe, affordable housing within struggling communities that need help the most, and it does it by wringing as much value as possible out of taxpayer dollars,” said Senator Wyden.
“In an era when natural disasters like wildfires are posing greater dangers to cities and towns in Oregon, this bill also creates a new lifeline for communities hit by those disasters to get back on their feet. Even though Congress is sharply divided on a lot of issues, the cost of housing has been on the rise everywhere, and this bill is a testament to the bipartisan interest in addressing this challenge,” he explained.
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.
“Although the Fair Housing Act made housing discrimination illegal more than 50 years ago, too many of our communities – particularly Black and brown communities – still reflect historic patterns of segregation and racial disparities in wealth and homeownership,” said Senator Brown.
“The Neighborhood Homes Investment Act will help overcome historic patterns of disinvestment in low-wealth neighborhoods and give families a chance to build wealth through homeownership in the communities they love,” he added.
The maximum credit amount is the lesser of the excess of development costs over the sales price, 35% of development costs, or 28% of the national median price for new homes.
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 $7 per capita or $9 million, whichever is higher.
The Neighborhood Homes Investment Act (NHIA) is supported by the following organizations:
- American Bankers Association
- BPC Action
- Center For Community Progress
- Coalition For Home Repair
- Community Home Lenders of America
- Community Preservation Corporation
- Enterprise Community Partners
- Grounded Solutions Network
- Habitat For Humanity
- Home By Hand
- Homeownership Alliance
- Housing Assistance Council
- Housing Partnership Network
- Independent Community Bankers of America
- Local Initiatives Support Corporation
- Low Income Investment Fund
- Mortgage Bankers Association
- National Alliance of Community Economic Development Associations
- National Association of Affordable Housing Lenders
- National Association of Hispanic Real Estate Professionals
- National Association of Real Estate Brokers
- National Association of Realtors
- National Association of The Remodeling Industry
- National Association of State and Local Equity Funds
- National Community Reinvestment Coalition
- National Community Stabilization Trust
- National Council of State Housing Agencies
- National Housing Conference
- National Neighborworks Association
- National Urban League
- Prosperity Now
- Rebuilding Together
- RECONOMICS Institute
- Rocket Mortgage
- Structured Finance Association
- Unidos Us
- Up For Growth Action
“Investing in revitalizing homes will help bring new life to struggling communities across Kansas and provide affordable housing options for families,” said Senator Moran.
“This legislation will help provide an incentive to restore declining neighborhoods and make the dream of homeownership more attainable for low-income Americans, particularly in rural communities,” he concluded.
Photo of houses in Cairo, Illinois by chertoro from Pixabay.
See the full text of the Neighborhood Homes Investment Act (PDF).