U.S. House of Representatives Introduces Bill For Single Family Rehab Tax Credit

(July 2019) NCST is excited to announce that a single family tax credit bill has been introduced in the U.S. House of Representatives by Representative Brian Higgins (D-NY) and Representative Mike Kelly (R-PA) – the Neighborhood Homes Investment Act (H.R. 3316)!

As many are aware, we have been working alongside several housing organizations in the Neighborhood Homes Investment Act (NHIA) coalition for the past few years to develop federal legislation to bridge the value gap that exists when the costs to acquire and rehab a home exceed its fair market value. The legislation approaches this problem through the mechanism of a tax credit because it’s unlikely that we’ll see another subsidy program like the Neighborhood Stabilization Program in today’s political climate.

In addition to the efforts of NCST staff in helping to develop the NHIA concept and to build the coalition, NCST was particularly well prepared to provide granular information and advice about specific aspects of the bill based on the years of data we’ve collected from working with our local community buyers. Specifically, we used our data and mapping expertise to refine the definition of “substantial rehabilitation” and develop maps of neighborhoods that would qualify for the tax credit.

In order to qualify for the tax credit under H.R. 3316, developers must substantially rehabilitate the home, with “substantial development” defined as follows:

(4) SUBSTANTIAL REHABILITATION: The term ‘substantial rehabilitation’ means rehabilitation efforts involving qualified development costs that are not less than the greater of

(A) $20,000 and

(B) 20 percent of the cost of acquiring buildings and land.

Originally, the draft bill included a flat minimum of $25,000. However, NCST’s analysis showed that while the median rehab cost was $40,000 when we aggregated data from all markets, the median rehab cost was just a little over $20,000 in lower cost markets such as Detroit and Dayton. This is shown below in Images 1 and 2, respectively. Our analysis led us to advocate for a more flexible definition of “substantial rehabilitation” to increase the likelihood that our buyers in distressed communities with low-value homes would be able to qualify for this tax credit. We believe that these are the geographic areas of the country that could benefit most if this bill becomes law.

Image 1

Image 2

We also used our mapping capability to help create visual depictions of the areas eligible for the tax credit. We shared these maps with partners and Congressional offices, including bill co-sponsors Rep. Higgins and Rep. Kelly, to build support for our proposal. For example, Image 3 (below) shows the areas of Rep. Higgins’ (NY-26) district that would qualify for the tax credit. Image 4 (below) specifically focuses on the Erie community within Rep. Kelly’s (PA-16) district, where approximately half of the neighborhoods would qualify.

Image 3

Image 4

Under the current legislative language, homes must be located in a census tract that meets the following requirements:

  • Tract poverty rate is greater than 130% of the area poverty rate
  • Tract Median Family Income is less than 80% of the Area Median Family Income
  • Tract median home value is less than 100% of the area median home value

There are many more steps before this bill becomes a law, but bill introduction is a necessary first step. We applaud our House sponsors for introducing the legislation, and we are going to work with them to build support for this idea in both the House and the Senate. It can take years to move bills through Congress but sometimes there is an opportunity to include something like the NHIA as part of a broader bill, and we will continue meet with policymakers to advocate for this. During this time, we encourage you to check out the NHIA website for legislative updates and reach out to us at any point with questions.


Theo Chang serves as the Director of Research & Strategy for NCST.