White House Proposes LIHTC-Inspired Program to Address Racial Wealth Gap
The Biden-Harris administration recently announced a set of proposals designed to help narrow the racial wealth gap and reinvest in distressed communities, focusing on expanding access to homeownership and small business ownership. The administration’s announcement provides new information regarding President Biden’s American Jobs Plan proposals to create jobs and build wealth in communities of color.
Among the proposals is a new program modeled after the Low-Income Housing Tax Credit program. The Neighborhood Homes Tax Credit program intends to attract private investment in the development and rehabilitation of affordable homes for low- and moderate-income homebuyers and homeowners. State housing finance agencies would receive an annual allocation of Neighborhood Homes Tax Credits based on population. Each state’s housing finance agency would then award tax credits to project sponsors (developers, lenders, or local governments) through a competitive application process. Sponsors would use the credits to raise investment capital for their projects, and the investors could claim the credits against their federal income tax when the homes are sold and occupied by eligible home buyers. These tax credits would cover the difference between total development costs (including acquisition, rehabilitation, demolition, and construction) and the sales price. This would, for example, make it financially viable to spend $120,000 acquiring and rehabilitating a vacant property that would sell for only $100,000 on the open market by offering a $20,000 tax credit to cover the difference.
Only homes located in census tracts with poverty rates of at least 130 percent of the area poverty rate, median family income below 80 percent of area median income, and median home values lower than the area median value would be eligible for the credit. This covers approximately one in four census tracts nationwide—the most underserved communities in America. Homes that are redeveloped using the credit could sell for only four times the area median family income, and home buyers couldn''t have incomes exceeding 140 percent of the area median family income. This would enable low- and moderate-income buyers—including home buyers of color—to purchase their own homes and build wealth.
In addition, the Department of Transportation would establish the Thriving Communities Program to support communities’ efforts to eliminate persistent transportation barriers and increase access to jobs, schools, and businesses. This initiative would invest $5 billion in historically marginalized communities and bring stakeholders together to ensure that more communities have clean, robust, and affordable transportation options, including high-quality transit, equitable neighborhood revitalization, and other enhancements to improve neighborhood quality of life and address climate change.