Sponsors (68)
Introduced April 10, 2025 by Mike Kelly · Last progress April 10, 2025
The bill expands affordable homeownership and incentivizes construction in distressed areas through targeted tax credits and state allocations, but it does so at the cost of federal revenue, added administrative complexity, and risks of displacement and limited reach in high-cost markets.
Low- and moderate-income homebuyers (household incomes up to 140% of AMFI) can purchase newly built or rehabilitated starter homes at below-market prices thanks to statutory price caps and targeted credit rules.
Distressed neighborhoods and low-income communities would see increased development and rehab of starter homes because tax credits and developer incentives improve project feasibility, expanding local affordable housing supply.
Small builders and developers receive a nonrefundable tax credit that covers part of unmet development costs, improving financial feasibility of projects and encouraging participation by smaller firms.
The tax credits reduce federal tax revenue and could increase the deficit or crowd out other federal spending priorities, imposing fiscal costs on taxpayers.
Complex eligibility, allocation, and compliance rules (including Fair Housing consistency requirements) create substantial administrative burdens for State agencies, the IRS, and small builders, which could delay projects and raise costs.
If credits and programs are not carefully targeted, revitalization could accelerate gentrification and displace existing low-income residents and renters in improved neighborhoods.
Based on analysis of 3 sections of legislative text.
Creates a new tax credit to cover part of the gap between development costs and affordable sale prices for starter homes, with per-unit and cost caps and agency allocations.
Creates a new federal tax credit (added as a new Internal Revenue Code section) that helps close the financing “value gap” for building or substantially rehabilitating starter homes in distressed rural and urban neighborhoods. The credit is claimed by developers or owners for each qualified residence sold as an affordable sale and is capped by three tests: the gap between development cost and sale price (with limited upward adjustment), 40% of eligible development costs, and a percentage of the national median new-home sale price. The bill defines which costs count, limits acquisition cost inclusion, sets a rule for substantial rehabilitation, and gives a designated neighborhood homes credit agency authority to allocate credits and judge cost reasonableness while minimizing burdens on small businesses and complying with fair housing law. The credit targets projects that otherwise would not be financially feasible because sale prices in distressed areas are too low to cover development and rehabilitation costs. It includes timing rules for which costs may be included in an allocation, standards for agency review of costs and feasibility, and formulas to compute the per-home credit amount.