The Neighborhood Homes Investment Act
A Bipartisan Solution to Expand Homeownership Supply and Revitalize Neighborhoods and Small Towns Throughout the Country
The Problem
An estimated shortage of several million homes and rising costs of housing are pushing homeownership out of reach for first time homebuyers, and as our existing housing stock ages, many lower income homeowners cannot afford to finance critically needed repairs.
40 years old: The median age of today’s first-time buyer, an all-time high.
60% of U.S. homes are at least 35 years old.
The Solution
The Neighborhood Homes Investment Act is the bipartisan, tax-based solution that is flexible enough to solve all of these inter-related challenges. This is how it works:
• Federal tax credits would cover a portion of the development or rehabilitation costs of single-family homes: up to 40% of costs for new home development, and 50% of costs for owner occupied home rehabilitation.
• The tax credits are allocated to states through a per capita formula. State agencies award credits to developers through annual competitions, setting the selection criteria and cost and construction standards, and monitoring awardees for compliance.
• Developers use tax credits to secure private investment capital that can finance:
The “value gap”, which is the difference between the cost of developing a new home and the price the home can sell for at a market rate;
The “affordability gap”, which is the difference between the value of the home and a sales price that is affordable to a lower income homebuyer; and/or
The “home repair gap”, to provide more equity to homeowners struggling to secure traditional bank capital for needed home repairs.
• Developers have five years to develop or rehabilitate homes. Investors can claim credits on a rolling basis only after each home is completed, inspected, and occupied by an eligible homeowner.
• The tax credits are highly targeted and efficient:
State agencies must target at least 60% of credits in economically challenged communities.
The sales price of a newly constructed home cannot exceed 4x the area median income (AMI); and the credit claimed on new homes generally cannot exceed the actual value gap at time of sale.
Homes can only be occupied by families making below 140% of AMI (100% of AMI in the case of owner occupied rehabilitations).
Any credits unused by an awardee are returned to the state agency for future allocations.
Who Benefits and Where
The legislation is designed to support the array of needs facing our families and communities, most notably by:
INCREASING THE SUPPLY OF NEW HOMES by bridging the gap between the costs of building new homes or rehabilitating vacant homes and the sales price of those homes, particularly in economically challenged communities.
MAKING HOMES MORE AFFORDABLE. In markets where home values have increased in recent years, the tax 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.
HELPING LOWER INCOME FAMILIES MAKE CRITICAL HOME REPAIRS. The tax credit can be used to support home repair needs for lower income families, including for example older homeowners on fixed incomes and owners of homes in communities with lower home values – allowing families to shore up equity, age in place, and pass along wealth to future generations.
BUILDING DISASTER RESILIENT HOMES. The credit can help offset the higher costs of construction and home repairs in communities that have been impacted by, or have a higher chance of being impacted by, natural disasters.
PROVIDING A SOLUTION TO HIGH CONCENTRATIONS OF INVESTOR OWNED RENTAL HOUSING. Neighborhood homes tax credits can only be claimed for owner-occupied homes, providing a much needed antidote in markets where investors are acquiring single family homes in large numbers.
The Projected Impact of Neighborhood Homes Nationwide
The impact over 10 years with an average Neighborhood Homes Tax Credit of $60,000 would be:
500,000 homes built or substantially rehabilitated
$151 billion in total development activity
1.1 million jobs in construction/related industries
$102.7 billion in wages and salaries
$45.6 billion in federal, state, and local tax revenues and fees
CONGRESSIONAL ACTION NEEDED
COSPONSOR IN THE SENATE (S.1686)
Contact Greg Warren (greg_warren@young.senate.gov) in Sen. Young’s office, or Alex Porter (alex_porter@warner.senate.gov) in Sen. Warner’s office.
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.