New Housing Bill Rescinds $175 Billion in Border Funds, Creates $25K First-Time Homebuyer Credit

This legislation, dubbed the "Make Housing Affordable and Defend Democracy Act," is essentially two massive, unrelated bills glued together. On one hand, it proposes sweeping new tax credits designed to tackle the housing affordability crisis. On the other, it executes a massive, permanent cut to federal immigration enforcement and border security funding, rescinding over $175 billion.

The $175 Billion Funding Drop: What Gets Cut?

Let’s start with the money move that affects the federal budget immediately. Section 2 of this bill permanently rescinds a staggering $175.6 billion from funds previously set aside for immigration enforcement and border security. This isn't a temporary pause; it’s a permanent clawback of unobligated balances.

Where does the money come from? It’s cut across the board: $46.5 billion is rescinded from border infrastructure and wall systems; $45 billion from detention capacity; and nearly $30 billion from U.S. Immigration and Customs Enforcement (ICE) hiring and training. For federal agencies like Customs and Border Protection (CBP) and ICE, this means a massive, immediate hit to personnel, facilities, vehicles, and technology funding. If you live or work near the border, or if you rely on federal law enforcement for certain activities, this level of funding loss could significantly impact operations and staffing levels, creating a massive operational shift in how the border is managed.

The $25,000 Down Payment Helper

Now for the housing side, which is where the bulk of the bill’s text lies. Section 3 establishes a major new tax break: a First-Time Homebuyer Credit of up to $25,000. If you’re a first-time buyer (meaning you haven't owned a principal residence in the last 10 years), this credit covers qualified down payment and closing costs.

There are two significant boosts to this credit. First, if you are a "first-generation homebuyer"—defined as someone whose parents never owned a home or who aged out of foster care—the credit jumps to $50,000. Second, the credit can be received as an advanced payment directly into escrow, meaning you don't have to wait until tax season to use it for your closing costs. The catch? If you sell the home or stop using it as your primary residence within five years, you must repay the full credit amount. There are exceptions for military moves, divorce, or buying a new primary residence, but for most people, that 5-year recapture period means less flexibility.

Income limits apply, too: the credit starts phasing out if your prior year's income exceeds $300,000 (married filing jointly) or $150,000 (single), disappearing completely if you earn $100,000 over those thresholds.

Building Small and Converting Big

Sections 4 and 5 aim to increase the supply of affordable housing through tax incentives for construction and conversion. The Starter Home Construction Credit (Section 4) offers builders a credit equal to 15% (or 30% if sold to a first-time homebuyer) of construction costs for homes under 1,200 square feet and priced below 80% of the area median. This is designed to incentivize the construction of smaller, more attainable homes, though the credit is capped by allocations set by state housing agencies.

Section 5 introduces the Affordable Housing Conversion Credit, offering a 20% tax credit (up to 35% in certain cases) for converting non-residential buildings (think old office parks or defunct retail spaces) into affordable rental housing. To qualify, 20% of the units must be reserved for tenants earning 80% or less of the area median income for 30 years. This credit has a national funding cap of $12 billion, plus an extra $3 billion for projects in "economically distressed areas." This could be a game-changer for cities struggling with both commercial vacancies and housing shortages.

A New Lifeline for Renters

Finally, Section 7 tackles the rent crisis directly with the Renter Tax Credit. If you spend more than 30% of your adjusted gross income on rent, you are eligible for a credit that covers a percentage of the rent paid above that 30% threshold. The credit percentage is tiered based on income, ranging from 100% coverage for those earning under $20,000 down to 25% for those earning up to $100,000.

Crucially, the Treasury Department is tasked with setting up a system for monthly advance payments of this credit within six months. This means eligible renters could see the benefit throughout the year, rather than waiting for a lump sum at tax time. However, the rent used to calculate the credit is capped at 100% of the local "small area fair market rent," which could limit the benefit for low-income renters living in high-cost areas where rents significantly exceed that benchmark.