H.R. 2854 creates a new federal tax credit to encourage construction and rehabilitation of affordable homes in low-income neighborhoods, addressing the housing shortage that disproportionately affects disadvantaged communities. The credit covers 1-4 unit homes sold to buyers earning up to 140% of area median income and equals the lesser of: development costs exceeding the sale price, 40% of eligible costs, or 32% of the national median home price. State housing agencies manage allocations based on population, with credit priority given to projects that serve local housing needs and support small builders and remodelers. Homeowners who sell within five years must repay a portion of tax benefits, though hardship waivers are available, while a separate credit incentivizes contractors to rehabilitate homes for low-to-moderate income owners. The tax benefits take effect for tax years beginning after December 31, 2025, with the Treasury Secretary authorized to issue rules preventing abuse.
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