New tax credit aims to close affordable housing gap in distressed neighborhoods

What it does

This bill creates a new federal tax credit called the Neighborhood Homes Credit to help finance the construction and rehabilitation of affordable owner-occupied homes in low-income and distressed communities. Developers and builders receive a tax credit equal to the gap between development costs and the affordable sale price (capped at various percentages), and homebuyers in qualifying areas with incomes up to 140% of median family income can purchase these homes at below-market prices. The credit is administered by state agencies through a competitive allocation process, with annual per-state caps starting at $9 per capita or $12 million minimum, and includes a 5-year resale restriction with a 50% clawback of gains if the home is sold early.

Why we flagged it

The bill's core mechanism is a tax credit for developers and builders to subsidize affordable home construction and rehabilitation in low-income census tracts. While framed as a housing affordability measure, the operative benefit flows through the tax code to private developers, with homebuyer affordability as the stated end-use.

What the text implies

• The 5-year resale restriction with 50% gain clawback may discourage homeowners from making improvements or selling even in genuine hardship, potentially trapping equity and limiting mobility.
• State agencies have discretion to designate additional census tracts beyond statutory criteria, creating potential for political favoritism in allocation decisions.
• The credit is capped per state by population formula, meaning high-population states receive proportionally more funding, potentially concentrating benefits in larger metros rather than rural distressed areas.
• Developers can claim credits for up to 120% of the value gap if deemed necessary for feasibility, creating moral hazard and potential for inflated cost claims.
• The bill excludes related-party sales and imposes strict acquisition-timing rules, but does not explicitly prevent flipping or speculative acquisition strategies by developers prior to the 3-year lookback window.

Section numbers refer to the bill text the analysis read — linked under Primary records below.

Who it affects

Ordinary citizens in low-income areas gain access to affordable homeownership and wealth-building opportunities through below-market purchase prices and financing support. The bill directly targets distressed communities and includes income caps to ensure benefits reach lower-income households, though the mechanism relies on tax credits to developers, which may reduce the direct subsidy reaching homebuyers compared to direct grants.

Who stands to gain

• residential developers and builders
• real estate investment trusts (REITs) with residential portfolios
• construction and rehabilitation contractors
• property management companies

Named in the bill

Internal Revenue Service (IRS), Department of Housing and Urban Development (HUD), State energy offices, State neighborhood homes credit agencies, Equity Residential (EQR), Apartment Investment and Management Company (AIR), National Health Investors (NHI), Mid-America Apartment Communities (MAA), Forestar Group (FRT)

Where it stands

70 cosponsors: 42 Democrats, 28 Republicans.

• Apr 10, 2025 — Introduced · Congress.gov: “Introduced in House”
• Apr 10, 2025 — Referred to House Committee on Ways and Means · Congress.gov: “Referred to the House Committee on Ways and Means”

Dates and quoted wording are Congress.gov's action record; the timeline shows status changes, not every procedural step.

Money around this bill

18 lobbying clients named this bill on 30 disclosure filings across 5 quarters, Jun 2025 to Jun 2026. Those filings disclosed $39,820,057 in lobbying spend. A filing names 12 bills on average, so that figure is what each filing reported, not a share belonging to this bill.

More lobbying clients named this bill than 96% of bills with at least one filing.

Mike Kelly, the sponsor, reported $955,974 in PAC receipts in the 2026 cycle. $2,500 of that came from 1 PAC tied to these lobbying clients.

• Chamber of Commerce of the U.S.A. — $16,950,000 on 1 filing
• National Association of Realtors — $14,580,000 on 1 filing
• National Association of Home Builders — $2,150,000 on 2 filings
• National Multifamily Housing Council Inc — $1,560,000 on 1 filing
• Mortgage Bankers Association — $1,220,000 on 1 filing

Lobbying Disclosure Act filings through Jul 21, 2026. A filing shows who paid to lobby on a bill it names, not what changed.