Neighborhood Homes Investment Act

This bill creates a new federal tax credit to help build or fix up homes for sale in struggling neighborhoods. The credit helps close the “appraisal gap” so builders can afford to construct or rehab homes and sell them at affordable prices. The credit size is limited by one of three caps, including up to 40% of eligible development costs or a set share of the national median new home price, to keep projects reasonable . Homes must be in designated census tracts with lower incomes or other qualifying needs, like disaster areas or places with a shortage of affordable owner-occupied homes . The sale price must be affordable (no more than about four times the area’s median family income, adjusted for 2–4 unit homes), and buyers must plan to live there and have family incomes at or below 140% of the area median .

Each state gets a yearly pool of credits, based on population or a minimum amount, and projects must finish within five years of the allocation. States must follow a public plan that prioritizes neighborhoods that need stable, owner-occupied homes, report results each year, and do outreach to small builders and remodelers . If a home is sold again within five years, a share of the seller’s profit goes back to the state agency to support more projects, with hardship waivers allowed . The bill also covers rehabs for current owner-occupants with lower incomes, offering a credit up to 50% of rehab costs or $50,000, with special rules for certain foundation repairs (like pyrrhotite) .

Key points

• Who is affected:
  • Builders and nonprofits doing new builds or major rehabs in eligible neighborhoods .
  • Homebuyers with incomes at or below 140% of area median; must live in the home .
  • Current owner-occupants with incomes at or below area median for certain rehab projects .
• What changes:
  • New tax credit to fill the gap between development costs and affordable sale price, with clear caps .
  • Price and income limits to keep homes affordable and owner-occupied .
  • Recapture of part of resale gains within five years to reinvest locally, with hardship exceptions .
• When:
  • States receive annual credit limits (at least $12 million or $9 per resident), and projects must be completed or sold within five years of allocation .