Coons, colleagues reintroduce tax credit to encourage revitalization of distressed homes
This week, Sens. Chris Coons, D-Delaware; Ben Cardin, D-Maryland; and Rob Portman, R-Ohio, introduced bipartisan legislation to revitalize housing in distressed neighborhoods.
Cosponsors include Sens. Todd Young, R-Indiana; Sherrod Brown, D-Ohio; and Tim Scott, R-South Carolina.
Currently, private development lacks in some urban and rural areas in Delaware and across the country because the cost of purchasing and renovating homes is greater than the value of the sale price of homes. The Neighborhood Homes Investment Act would create 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. The NHIA would also help existing homeowners in these neighborhoods to renovate and stay in their homes.
In Delaware, neighborhoods in and around Wilmington, Newark, Wilton, Bear, Duncan Woods, Dover, Harrington, Georgetown, Laurel, Bridgeville, Ellendale and Bethel would qualify for this federal tax credit.
“Homeownership offers a way to build wealth and security in America, yet even before the pandemic it has been out of reach for many families in Delaware and across the country,” said Coons. “This new tax credit will attract private investment for building and rehabilitating homes in distressed communities and open new homeownership opportunities for thousands of low-income families. I look forward to advancing the Neighborhood Homes Investment Act with my colleagues to take an important step toward a more equitable economic recovery from COVID-19.”
The NHIA could lead to the revitalization of 500,000 homes and create $100 billion in development revenue over the next 10 years. About 22% of metro areas nationwide and 25% of non-metro areas qualify for NHIA investments. NHIA targets neighborhoods that have poverty rates that are 130% or greater than the metro or state rate; have incomes that are 80% or less that area median income; and have home values that are below the metro or state median value.
The full text of the bill can be found at bit.ly/36o02uF.
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% 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% or greater than the metro or state rate; have incomes that are 80% or less than area median income; and have home values that are below the metro or state median value.
The maximum credit amount is the lesser of 35% of total development costs — property acquisition plus construction and/or rehabilitation cost — or of the national median home sale price. 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 $6 per capita or $8 million, whichever is higher.