Neighborhood Homes Investment Act

S. 1686 would establish a new federal tax credit program designed to increase the supply of affordable homes in economically disadvantaged communities. The bill would provide tax credits covering up to 40% of costs for new home construction and up to 50% of costs for rehabilitating existing owner-occupied homes. These credits would be allocated to states based on population, and state agencies would award them to developers through competitive processes, with at least 60% of credits targeted to economically challenged areas.

The tax credits are intended to bridge the "value gap" between what it costs to build or rehabilitate homes and what those homes can sell for in distressed markets. If enacted, the bill would only allow credits for owner-occupied homes, not investor-owned rental properties. Homes would need to be affordable to families earning below 140% of area median income, and developers would have five years to complete projects. Supporters project that over 10 years, the program could result in approximately 500,000 homes built or rehabilitated and generate significant economic activity and employment in construction-related industries.