The INCREASE Housing Affordability Act establishes a federal tax credit and an advisory board to incentivize and support the conversion of underutilized office buildings into residential and mixed-use housing.
Mikie Sherrill
Representative
NJ-11
The INCREASE Housing Affordability Act establishes a new tax credit to incentivize the conversion of underutilized office buildings into residential or mixed-use rental properties. To further support this effort, the bill creates an advisory board to provide technical assistance and guidance to state and local agencies on navigating the regulatory and logistical challenges of these conversions. By offering financial incentives and expert support, the legislation aims to accelerate housing supply and expand affordability across the country.
Office-to-Apartment Tax Credit Offers Up to $200,000 Per Unit to Boost Housing Supply
The INCREASE Housing Affordability Act aims to turn empty office cubicles into kitchen tables by creating a massive new tax credit for developers who convert commercial buildings into residential rentals. Under the bill, developers can claim a credit worth 15% of their conversion costs, capped at $200,000 per new apartment or $10 million per building. To qualify, the building must have been available for office use for at least 15 years before the renovation begins. This isn't just for luxury lofts, though; the bill dangles extra financial carrots for projects that include affordable units and pay workers local prevailing wages.
The Bonus Structure
To get the most out of this deal, developers have to meet specific social goals. If at least 25% of the new apartments are rent-restricted for people earning 60% to 100% of the area's median income, the tax credit percentage and the dollar caps can jump significantly—up to an extra 20% for the deepest level of affordability. On top of that, there is a 'Prevailing Wage Bonus' that adds another 15% to the credit if the construction crew is paid at rates set by the Secretary of Labor. For a contractor or a tradesperson, this means the federal government is effectively subsidizing higher paychecks on these specific job sites.
Fine Print and Fast Tracks
Converting a skyscraper isn't like flipping a house, so the bill includes a 'Progress Expenditure' option. This allows developers to claim the tax credit as they spend the money over a 24-to-60-month period, rather than waiting years for the first tenant to move in. To make sure these projects actually get off the ground, the bill also creates a $5 million-a-year Advisory Board at HUD. This board’s job is to help local cities cut through the red tape, reform zoning laws that usually block residential use in business districts, and figure out how to make weird office floor plans work for actual living.
The Real-World Trade-offs
While this could mean more housing in walkable downtown areas, there are some hurdles to watch. The bill specifically forbids 'double dipping,' meaning a developer can't use this new credit if they are already taking the Low-Income Housing Tax Credit or the Historic Rehabilitation Credit for the same project. For taxpayers, the concern is whether these credits—which represent a dip in federal revenue—will actually result in lower rents for the average worker or simply pad the margins for real estate firms. Additionally, because the IRS and Department of Labor have to set the specific rules for 'substantial conversion' and 'prevailing wages,' there’s a medium level of bureaucratic 'wait-and-see' before we know exactly how these rules will hit the ground in your local neighborhood.