New Act Offers 20% Tax Credit to Convert Offices into Affordable Housing, Capped at $12 Billion

The new Revitalizing Downtowns and Main Streets Act is essentially a massive federal subsidy aimed at solving two problems at once: the shortage of affordable housing and the glut of empty commercial real estate. It creates the Affordable Housing Conversion Credit, offering developers a 20% tax break on the costs of converting older commercial buildings into affordable rental units. This credit is available for buildings that have been around for at least 20 years and were used for non-residential purposes right before the conversion. Crucially, the total amount of these credits nationwide is capped at $12 billion, which state housing agencies will be responsible for handing out.

The 30-Year Affordability Commitment

If a developer wants this 20% tax break, they have to commit to keeping the building affordable for three decades. Specifically, for 30 years, at least 20% of the units must be rent-restricted and reserved for tenants whose income is 80% or less of the Area Median Income (AMI). Think of a family of four earning $65,000 in a metro area where the AMI is $80,000—they would qualify. The bill is borrowing the affordability rules from the existing Low-Income Housing Tax Credit program, meaning the rent itself has to be capped, not just the tenant's income. This long-term commitment is the biggest win for renters, ensuring these aren't just market-rate conversions.

Who Gets the $12 Billion? The State Gatekeepers

The way this credit is distributed is key. The federal government isn't just handing out checks; it’s allocating the $12 billion cap to state housing agencies based largely on population. These state agencies then become the gatekeepers, requiring developers to apply for the credit allocation. The state plan for awarding these credits must consider whether the project actually needs the credit to be financially viable, how much affordable housing it creates, and whether it’s near jobs and transportation. This means if a developer is already rich enough to pull off the conversion without the 20% tax break, the state should prioritize a project that wouldn't happen otherwise. There’s also an extra $3 billion set aside for projects in economically distressed areas.

What This Means for Everyday People

For the average person, this bill translates into two things. First, if you live in a city with vacant office buildings or old retail spaces, you might see those properties finally turn into apartments, potentially revitalizing downtown areas that have been struggling. Second, it should create more rental options for working families, students, and essential workers who are currently priced out of the market. The bill even offers extra incentives for developers who commit to serving tenants at 60% of the AMI, creating even deeper affordability in some units.

The Fine Print: Costs and Risks

While the goal is solid, the mechanism—a massive tax credit—carries risks. The $12 billion is a subsidy paid for by taxpayers. The credit is also transferable, meaning a developer can sell the 20% tax break immediately for cash, which is great for financing but might reduce the developer’s long-term stake in the project. Furthermore, if a building stops meeting the affordability requirements within that 30-year window, the developer has to pay back the credit (a “recapture” provision). If you’re a tenant in one of these units, that 30-year clock is critical; while it provides long-term stability, it also means that after three decades, the building is free to convert to market rates, potentially displacing tenants if the affordability commitment isn't renewed.