The "Revitalizing Downtowns and Main Streets Act" introduces a tax credit for converting non-residential buildings into affordable housing, aiming to boost economic development and provide affordable housing options in communities.
Mike Carey
Representative
OH-15
The "Revitalizing Downtowns and Main Streets Act" introduces the Affordable Housing Conversion Credit, a tax incentive for converting non-residential buildings into affordable housing units. This credit covers 20% to 35% of qualified conversion costs, depending on the location and project type, with a national cap of $12 billion allocated to states based on population and economic need. To qualify, conversions must meet specific criteria, including affordability requirements and building age, aimed at boosting affordable housing options and revitalizing communities. The credit is transferable and applies to buildings placed in service after the Act's enactment.
Empty Offices to Affordable Homes? New Bill Offers 20-35% Tax Credit for Conversions
Congress is looking at a plan to turn old office buildings, storefronts, and other non-residential spots into housing. The "Revitalizing Downtowns and Main Streets Act" introduces a new tax break, the "Affordable Housing Conversion Credit," designed to encourage developers to take on these projects. Essentially, it offers a tax credit covering 20% of the eligible costs for converting a commercial building into affordable housing units. That percentage can jump to 30% or even 35% if the project is in an economically distressed area or involves historic preservation.
Flipping Buildings: What's the Deal?
So, how does this work on the ground? Developers can claim this credit for the money spent directly on the conversion – think construction, materials, and making the building livable – but generally not for the cost of buying the building itself (unless it's cleaning up a contaminated 'brownfield' site). There are a few hurdles: the building needs to be at least 20 years old and wasn't used for housing before. Also, the renovation cost has to be significant, either more than half the building's value (its adjusted basis) or at least $100,000, whichever is higher. A key feature here is that developers can sell or transfer this tax credit to others, which could make financing these potentially tricky projects easier by bringing in investors looking for tax advantages.
Affordable for Whom, and For How Long?
The core goal is affordable housing, but the bill sets specific terms. To qualify, at least 20% of the new apartments must be rent-restricted and set aside for people earning 80% or less of the Area Median Income (AMI). Think of AMI as the midpoint income for a specific region – so this targets folks earning significantly less than the average household in their area. Crucially, these affordability rules have to stick for 30 years. This ensures a long-term commitment, but the 20% threshold means the majority of units in a converted building could still be market-rate. Whether 80% of AMI truly counts as 'affordable' can also vary wildly depending on how expensive the local housing market already is.
The Big Picture: Funding and Rollout
There's a limit to how many credits can be handed out nationwide – the total is capped at $12 billion. This pot of money gets divided among states based mostly on population, with an extra $3 billion earmarked for those economically distressed areas mentioned earlier. Each state then needs its own plan for deciding which projects get the green light, considering things like whether the project makes financial sense, how much affordable housing it actually creates, and if it helps nearby local businesses. This state-level planning adds another layer to how effectively the program targets areas with the most need versus just spreading the funds broadly.