Bipartisan legislation to create a neighborhood homes tax credit would address the needs of families throughout the country who are struggling to purchase homes as costs continue to rise and the supply of homes remains limited, the American Banker Association said last week in comments to committee leaders in the House and Senate. The association also expressed support for a separate but related bill that would expand the existing the Low-Income Housing Tax Credit, or LIHTC, which is used to boost construction of rental housing for lower-income households.
The Neighborhood Homes Investment Act—which has been introduced in both chambers—would establish a tax credit for neighborhood revitalization. It would build on existing policies such as the LIHTC and New Markets Tax Credit by attracting investments in communities with elevated poverty rates, lower incomes and modest home values, ABA said. The credit would only be available to investors after home construction or renovation has been completed and the property has been sold to a homeowner, the association added. “Thus, investors—not the government—bear the underlying economic risk of development.”
ABA also urged passage of the Affordable Housing Credit Improvement Act, which would increase LIHTC allocations, lower the threshold of private bond financing from 50% to 25% required to trigger certain credits, and expand LIHTC to better serve hard-to-reach communities. “LIHTC is our nation’s most successful tool for encouraging private investment in the development and preservation of affordable housing, and the AHCIA would enact meaningful reforms further enhancing LIHTC,” the association said.