The Neighborhood Homes Investment Act (NHIA)
Expanding affordable homeownership opportunities and revitalizing communities
With development of housing lackluster in many urban and rural communities across the country, leaving distressed neighborhoods in a seemingly never-ending cycle of need, a pair of U.S. Senators are trying to take action and get the pendulum swinging back in the other direction. Senate Finance Committee members Ben Cardin (D-Md.) and Todd Young (R-Ind.) introduced bipartisan legislation recently that is titled the Neighborhood Homes Investment Act (NHIA).
The legislation would create a federal tax credit to cover the cost between either building or renovating a home in earmarked communities of need, and capping the price at which these homes can be sold.
Additionally, the NHIA is designed for existing homeowners in these communities to get help renovating and staying in their homes.
“Everyone deserves a safe and affordable place to call home,” Cardin said in a statement. “Our bipartisan tax credit will drive housing investments and revitalize neighborhoods… while keeping them affordable for low- and moderate-income families.
“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.”
According to a press release, The NHIA could lead to the revitalization of approximately 500,000 homes nationwide and create $125 billion in development revenue in the next decade.
The legislation indicated that about 22% of metropolitan areas and 27% of non-metro areas would qualify for these NHIA investments.
“Everyone deserves a safe and affordable place to call home. Our bipartisan tax credit will drive housing investments and revitalize neighborhoods… while keeping them affordable for low- and moderate-income families.”
– Senator Ben Cardin (D-Md.)
Qualifying neighborhoods have poverty rates that are at or below 130% or greater than the state or metropolitan rate; have home values that are at or below the state or metropolitan median value; and have collective income that are at or below the state or metro median.
“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… families,” Young said in a statement.
According to the legislation, the government does not bear any risk in offering these tax breaks to potential investors. The credits would only be received once the development is completed and the home is occupied by an eligible homeowner.
Additionally, ensuring that the new or improved housing directly benefits the members of these communities and doesn’t lead to the gentrification of an area, all homes that are constructed or revitalized under this program must be sold to homeowners who make less than 140% of the area median income.
Senators Ron Wyden (D-Ore.), Jerry Moran (R-Kan.), and Sherrod Brown (D-Ohio) cosponsored the legislation.
“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 home ownership,” Brown said in a statement. “(NHIA) 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.”
Additional details provided in the press release indicate that NHIA tax credits are awarded to project sponsors—developers, lenders, or local governments—through a competitive application process administered by each state’s housing finance agency.
“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… families.”
– Senator Todd Young (R-Ind.)
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 home buyers. State agencies would have annual allocation of either $7 per capita or $9 million, whichever is higher.
Also, 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.
The Treasury Department would be required to provide an annual report on the performance of the program, if adopted.