June 15, 2023

By Monica Hogan, Inside Mortgage Finance

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A bipartisan group of House members last week reintroduced legislation that would offer tax incentives to support the creation or substantial rehabilitation of 500,000 starter homes in under-resourced communities over the next 10 years.

The sponsors of H.R. 3940, the Neighborhood Homes Investment Act, are Reps. Mike Kelly, R-PA, and Mike Higgins, D-NY. Co-sponsors include Reps. Claudia Tenney, R-NY, Dan Kildee, D-MI, Randy Feenstra, R-IA, and Dwight Evans, D-PA.

“For too long, the cost of rehabilitating a home has been more expensive than simply starting from scratch,” Kelly said.

Sens. Ben Cardin, D-MD, and Todd Young, R-IN, introduced counterpart legislation in the Senate Finance Committee in March.

The Senate bill notes that housing revitalization in distressed communities is limited by the “value gap,” which is the difference between the price to rehabilitate a home and the sale value of the home.

The Neighborhood Homes Investment Act would address that longstanding challenge, Buzz Roberts, CEO of the National Association of Affordable Housing Lenders, said in an interview.

Roberts said under-resourced neighborhoods can’t be stabilized until they can confront the challenge of the distressed single-family homes there.

The new tax credits would help break through the vicious cycle of neighborhood disinvestment and decline, and help address housing supply shortages, he said.

The legislation won’t solve the housing shortfall on its own, Roberts said, but it would help. He said he’s heard from stakeholders in rural areas that communities can’t retain or attract businesses if they don’t offer enough available housing.

The Community Home Lenders of America has thrown its support behind the bill.

“Housing demand for single-family homes continues to outpace supply in many parts of the country, so it just makes sense that we incentivize rehabilitation of older homes and target the initiative to make homeownership more affordable for low- and middle-income families in underserved communities,” CHLA said in a statement.

Also backing the legislation is a large coalition of non-profits and industry, including the Mortgage Bankers Association, Rocket Mortgage, Habitat for Humanity and the Structured Finance Association.

Similar legislation was introduced in the previous session of Congress, with bipartisan support.

Roberts noted that the housing tax credits legislation was part of the Build Back Better bill that failed to pass the Senate. But the housing credits did not make it into the Inflation Reduction Act that was passed in the last Congress.

He said the tax credit legislation would have the best chance in this Congress if it’s attached to a larger piece of tax legislation.

Citing the partisanship in the current Congress, Roberts said, “It’s noteworthy that this is attracting bipartisan support. The only bills that are really going to have a chance to move are those that have consensus.”