The Neighborhood Homes Investment Act
Building Homes, Revitalizing Communities, and Increasing Wealth through Homeownership
THE PROBLEM
Our nation is experiencing a housing affordability crisis. Americans are finding it increasingly difficult to purchase their first home, and as our existing housing stock ages, many lower income homeowners cannot afford to finance critically needed repairs.
21%: The market share of first-time homebuyers, a historic low.
40 years old: The median age of today’s first-time buyer, an all-time high.
27 years vs. 44 Years: The median age of a single-family home in 1993 compared to 2023.
THE CAUSES
The affordability challenges are driven by at least four primary factors:
Lack of Housing Supply
America has been under-producing homes for decades, creating a shortfall of millions of homes and driving up home prices for all potential homebuyers.
Increased Construction Costs
Prices for construction materials have risen steadily since 2000 and remain significantly higher than pre-pandemic levels; making it more difficult to build moderately priced homes for first-time homebuyers.
Rising Home Prices
Starter home prices surged 54% over the past five years, from $190,559 in 2019 to $292,950 in 2024.
Higher Borrowing Costs
The twin impacts of rising home prices and rising interest rates on home loans have caused monthly payments on the typical starter home to rise by 116% nationally from five years earlier, and in some states the figure is well over 150%.
THE SOLUTION
As complex as these challenges are, there is a solution: Congress needs to enact the Neighborhood Homes Investment Act (S.1686/H.R. 2854).
• This bipartisan legislation would create a federal tax credit to support the development and rehabilitation of single-family homes, with a priority on homes in economically challenged communities.
• The tax credits would be administered by state housing finance agencies, which would identify targeted communities, award credits to qualified developers though annual competitions, set cost and construction standards, and monitor awardees for compliance.
• The credit is targeted and efficient. It can only be applied to the portion of the project costs needed to ensure financial viability, and any unused credits would be returned to the state agency for future distribution.
• The credit benefits families most in need. It can only be used to support moderately priced homes affordable to families making below 140% of area median income (below 100% of area median income in the case of owner occupied rehabilitations).
It is also flexible enough to support the array of needs facing our families and communities, most notably by:
1. Spurring the Development of New Homes in Communities with Low Home Values.
Neighborhood Homes prioritizes distressed communities, where construction costs typically exceed the value of the homes upon sale. This includes urban areas with high poverty, low family incomes and low home values; low-income rural communities; and communities that have been impacted by natural disasters. The tax credit would finance the gap between the total construction costs and the final sales price-- bringing new homes on line in communities that have been left behind.
2. Making Homes More Affordable for Lower Income Families and First-Time Homebuyers.
In other markets, where home values have increased in recent years, the Neighborhood Homes credit could be used as a tool to help developers bring down the sales price on a home, making the home more affordable to a lower income family or first-time homebuyer.
3. Helping Lower Income Families Make Critical Home Repairs.
Homeownership continues to be the best way for families to pass on legacy wealth. But older homeowners on fixed incomes, and owners of homes in communities with lower home values, often have difficulty securing financing needed to make critical home repairs to shore up the value of the property. The Neighborhood Homes Tax Credit can be used to offset 50% of the cost of home repairs in homes owned by families making below the area median income.