What Build Back Better legislation could mean for affordable housing developers
The Neighborhood Homes Tax Credit would help close financing gaps that deter constructing or rehabilitating housing in distressed areas.
Affordable housing, particularly for first-time and moderate-income homeowners, has become a rare beast just as the millennial generation comes into its buying power. Legislation currently working its way through Congress could give both buyers and developers a big boost, however.
A number of provisions nestled inside the Decent, Affordable, Safe Housing for All Act (DASH Act) are designed to entice investments in overlooked and underserved areas, such as distressed and rural communities. Within the DASH Act is the Neighborhood Homes Investment Act, which would fund a state-administered tax credit to builders and developers of affordable homes, the Neighborhood Homes Tax Credit (NHTC). One key provision to keep pork to a minimum and guarantee real community-building: The tax credit applies to owner-occupied homes, those that serve as the primary residence for the person who holds the title to the property.
The NHTC would operate much like the existing Low-Income Housing Tax Credit (LIHTC), with the federal government disbursing tax credits and funding to state agencies to administer locally. The Build Back Better legislation passed by the House of Representatives in November includes nearly $12 billion for affordable housing measures, a little more than $2 billion of which is dedicated to tax credit allocations. These funds would be spread out over the decade between 2022 and 2031 (according to the DASH Act) offering a long window for builders and developers to act on this opportunity.
The Senate still has to pass the legislation, but for builders and developers, now is the right time to start thinking about how to incorporate affordable housing development into future projects. Investing in affordable housing delivers real, tangible benefits within communities, across local economies and for individuals and families. Furthermore, bringing resources to distressed and rural areas can create jobs across a variety of sectors, from the construction industry to new infrastructure to support new residents in a neighborhood.
Affordable housing is ripe for investment from both pros and newcomers, and with the possibility of billions of dollars in tax credits on the table, we’ll be keeping a close eye on how this legislation progresses. Meanwhile, if you have any questions about this topic, such as how the state of Florida might develop criteria for approving and allocating these incentives, our Affordable Housing Team can provide answers.
