Neighborhood Homes Investment Act

This bill creates a federal Neighborhood Homes tax credit to help rebuild or repair homes for sale in struggling neighborhoods. It helps close the gap between what it costs to build or fix a home and what a family can afford, within set limits. The credit can cover part of the “gap” or part of project costs, up to the lesser of 40% of eligible costs or 32% of the national median new home price; eligible costs include land, construction, major rehab, demolition, and environmental cleanup. Major rehab generally means more than $25,000 or 20% of the property’s purchase cost.

Homes can be single-family houses (up to four units), condos, or co-ops in designated census tracts with lower incomes, higher poverty, disaster recovery needs, or a shortage of affordable owner-occupied homes . To count as an “affordable sale,” the price is capped based on local income levels, and the buyer must live in the home and have income at or below 140% of the area median. Multi-unit homes have higher caps to reflect their size. States run the program through a designated housing agency with a yearly limit (at least $12 million or $9 per resident), and projects must be finished within five years of receiving an allocation. If the home is sold again within five years, part of the seller’s gain is paid back to the state agency; the agency can place a lien and may waive payback for hardship. Renting the home during this period does not get tax write-offs if it isn’t your main home . States must use a public plan to pick projects, set quality and cost standards, report results each year, explain unusual awards, and do outreach to small builders and remodelers . There is also a credit to fix an owner-occupied home for families at or below the area median income, covering up to 50% of repair costs, capped at $50,000. Some homes with crumbling foundations caused by certain minerals can qualify even outside the usual areas .

Key points

• Who is affected: home builders and remodelers; state housing agencies; home buyers with incomes up to 140% of area median in eligible neighborhoods; current homeowners at or below area median income who need major repairs.
• What changes: a new federal tax credit supports building or fixing owner-occupied homes, with price and income limits, five-year completion and resale rules, and state oversight to target neighborhoods in need.
• When: projects must be completed (or rehab finished) within five years of allocation; selling within five years can trigger a partial payback to the state agency.