Courtesy: CMG Financial

At the end of May, HUD Secretary Marcia Fudge introduced details of President Biden’s $2.3 trillion infrastructure proposal dubbed the “American Jobs Plan.” A large part of this plan is the proposed $318 billion dedicated to housing investments. Additionally, the Biden Administration proposed a new federal tax credit, the Neighborhood Homes Tax Credit, designed to encourage construction and rehabilitation of homes in underserved communities. The primary goal of this act would likely to increase homeownership opportunities for low- and moderate-income buyers in underserved communities. However, there would also be another large incentive be for inventors.

One of the goals of the Neighborhood Homes Tax Credit would be to incentivize “private investment in the development of affordable homes,” according to a White House fact sheet. Investors who purchase, rehabilitate, and sell homes in underserved areas would qualify for the tax credit – which would help cover any losses that investors might incur from investing in these areas. Not only does this benefit the investor, but it helps develop undeserved areas and provide homeownership opportunities to lower-income families.

A key step in this process is the sales factor. Investors won’t qualify for the tax credit upon their purchase of a home. They’ll need to rehabilitate and then sell the property to eligible home buyers. The proposal also stipulates that the sales price must not exceed four times the area median family income. Incomes of the home buyer must not exceed 140% of the area median family income.