Neighborhood Homes Investment Act

Key Points

• This bill creates a new federal tax credit to help build or renovate homes in distressed neighborhoods. It targets the "value gap" where the cost to develop a home exceeds what it can sell for, discouraging builders from investing in struggling areas. The credit covers the gap between development costs and the sale price, up to 40% of eligible costs or about 32% of the national median new home price.
• The program is limited to qualified census tracts with high poverty rates, low family incomes, or low home values compared to surrounding areas. It also covers disaster areas and rural nonmetropolitan counties. States receive annual credit allocations based on population at roughly $9 per person, with a minimum of $12 million for smaller states.
• Homebuyers must earn no more than 140% of the area median family income, and the home must be their principal residence. For existing homeowners seeking rehabilitation help, income must be at or below the area median. This targets working and middle-class families in neighborhoods that lack quality, affordable starter homes.
• If a buyer sells the home within five years, they must repay a share of their profit to the state credit agency. The repayment starts at 50% of the gain and drops by 10 percentage points each year. The agency can waive this requirement in cases of hardship like divorce, disability, or illness.
• The bill also includes a rehabilitation credit for homeowners who already live in qualifying areas. Contractors can receive a credit of up to $50,000 for renovating an owner-occupied home, helping existing residents stay in place while improving housing quality and neighborhood stability.
• State-designated agencies will administer the program using qualified allocation plans that prioritize projects based on community need, expected contribution to neighborhood stability, and the likelihood of long-term homeownership. The bill takes effect for tax years beginning after December 31, 2025.