June 1, 2021
The Biden Administration on Tuesday provided additional details to its federal tax credit proposal aimed at boosting low- and middle-income homeownership.
The credit was originally proposed in March as part of the American Jobs Plan to spur construction and rehabilitation of homes for underserved communities.
The credit has not become law. In fact, Congress has yet to even debate the credit as part of the American Jobs Plan. That debate is expected to begin soon in Congress, but passage of such legislation could be months away.
As for the federal tax credit proposal, it is dubbed the “Neighborhood Homes Tax Credit,” and it seeks to attract private investment to develop and rehabilitate homes for low- and moderate-income individuals and families.
Under the proposal, state housing finance agencies would receive an annual allocation of the credit based on population. These agencies through a competitive bidding process would then award these credits to project sponsors, like developers or lenders. The credit would cover the cost difference of building the home and its sale price. For example, a sponsor building a home for $120,000 and selling it for $100,000 would receive a $20,000 credit.
The credit would be available where:
“This covers approximately 1 in 4 census tracts nationwide – the most underserved communities in America,” the White House Fact Sheet states.
Homes using the credit cannot sell for more than four times the area’s median family income level. Also, purchasers of these properties cannot have incomes that exceed 140% of the area’s family median income level.
Negotiations on the American Jobs Plan have been at the Administration level between President Joe Biden and Congressional Republicans. These talks have endured for several weeks with no sign that the two sides will reach an agreement anytime soon. It is also unclear if the Neighborhood Homes Tax Credit will be a part of any agreement, assuming one is reached.
Biden is scheduled to meet with Congressional Republicans on Wednesday to continue negotiations on the American Jobs Plan, which includes infrastructure proposals. The current prognosis is that a deal will not be reached in this meeting.
If no agreement materializes by the week’s end, Congressional Democrats may abandon efforts for a bipartisan bill and move forward on legislation that is solely backed by Democrats.
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