The Neighborhood Homes Investment Act: A Tool For Building New Homes And Rehabilitating Aging Homes In Rural Communities

Rural communities face unique challenges when it comes to creating homeownership opportunities, including: a shortage of housing supply, aging and substandard housing stock, higher costs of construction, and incomes that have not kept pace with housing prices. These challenges also make it difficult to develop new homes that are affordable to residents, as well as to finance home repairs for existing homeowners. The Neighborhood Homes Investment Act would address these inter-related issues by creating a tax credit that covers the difference between these construction costs and the value of the homes after construction or sale. This “value gap” is particularly pervasive in rural communities.

The Challenges

LIMITED SUPPLY OF HOUSING AND AGING HOUSING STOCK

From 2013 to 2023, the housing stock in rural counties increased by about 1%, compared to a 10% increase in non-rural counties. Around 1.87 million new rural homes were constructed, but 1.62 million older rural homes disappeared, offsetting much of that increase.

Existing Housing Stock is Aging and Often in Disrepair

As noted in an August 2025 white paper by the White House’s Council of Economic Advisors, the average age of housing in rural communities has increased by 8.5 years over the past 17 years.

According to estimates from HUD’s American Housing Survey, over 1.4 million, or 5.6 percent, of homes in rural areas are classified as inadequate. Roughly 368,000 of these substandard homes have serious deficiencies with plumbing, heating, electric/wiring, or upkeep, and are considered severely inadequate.

HIGHER CONSTRUCTION COSTS

As noted in a report from the U.S. Department of Housing and Urban Development in January, 2026:

“Construction can also be more difficult and costly in remote rural areas. Barriers to greater supply include the lack of local builders and construction workers and the costs involved for them to travel from larger markets, the difficulty of building at scale in low-density areas, and the expense of connecting infrastructure to serve these areas. Materials costs may escalate with additional shipping and handling, and additional pay or benefits may be required to attract labor to distant locations.”

NEW HOMES ARE NOT AFFORDABLE TO MOST POTENTIAL RURAL HOMEBUYERS

Incomes are lower in rural communities and have not kept pace with increased housing prices:

In 2024, the $63,750 median household income in counties outside metropolitan areas was 27 percent lower than the $87,410 median in metropolitan counties. Source: U.S. Census Bureau, Income in the United States, 2024

There has been a 75% increase in rural home prices from 2000 to 2023, while rural homeowner incomes have grown only 12.3%. Source: Council of Economic Advisers, The Deterioration of Housing Affordability in Rural America

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 credit would support the array of needs facing rural families and communities, most notably by:

SPURRING THE DEVELOPMENT OF NEW HOMES IN DISTRESSED RURAL COMMUNITIES

Neighborhood Homes prioritizes distressed communities, where construction costs typically exceed the value of the homes upon sale. This includes low-income rural communities and communities that have been impacted by natural disasters, as well as urban areas with high poverty, low family incomes, and low home values. 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.

MAKING HOMES MORE AFFORDABLE FOR LOWER INCOME FAMILIES AND FIRST-TIME HOMEBUYERS, HELPING TO RETAIN AND ATTRACT RESIDENTS AND EMPLOYERS

In rural markets where home values have increased at a rate well beyond family incomes, 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. Communities with affordable housing can attract the workers that employers need, making it more likely that jobs will be available and population will stabilize or increase.

HELPING LOWER INCOME FAMILIES MAKE CRITICAL HOME REPAIRS

Homeownership continues to be the best way for families to pass on legacy wealth. But older rural homeowners on fixed incomes, and owners of homes in rural communities with lower home values often have difficulty securing the 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, allowing them to make critically important repairs that will allow them to age in place or “harden” their homes to better withstand weather events.

CONGRESSIONAL ACTION NEEDED

COSPONSOR IN THE HOUSE (H.R. 2854)
Contact Jacob Rogers (jacob.rogers@mail.house.gov) in Rep. Kelly’s office; or Emily Naden (emily.naden@mail.house.gov) in Rep. Larson’s office.

COSPONSOR IN THE SENATE (S.1686)
Contact Greg Warren (greg_warren@young.senate.gov) in Sen. Young’s office, or Spencer Gilbert (spencer_gilbert@warner.senate.gov) in Sen. Warner’s office.