Good afternoon —
When people think of a housing shortage, the first solution that comes to mind is: we need to build more homes. But what about rehabbing older existing houses to get them up to code and make them livable?
From 2009 to 2016, 1.7 million older housing units were demolished and removed from the housing stock, according to NAR. This article by Freddie Mac says that if those homes had been renovated, available housing stock would have more than doubled by 2017.
Now, it seems like the Biden administration has a plan to address the housing shortage while also helping to increase homeownership among lower-income borrowers.
On Tuesday, Biden announced the Neighborhood Homes Tax Credit, which would incentivize the rehabbing of outdated homes. As Senior Mortgage Reporter Georgia Kromrei writes:
"Investors who acquire and renovate older homes could claim the credit on their federal tax returns, as long as the home is sold to and occupied by an eligible buyer. In order for investors to qualify for the credit, buyers must make no more than 140% of area median income."
The tax credit would cover the difference between total development costs — including acquisition, rehabilitation, demolition and construction — and the sales price. But, the final sales price could not exceed four times the area median family income.
To be eligible for the credit, homes must be in census tracts with poverty rates of at least 130% of the area poverty rate, median family income below 80% of area median income, and median home values lower than the area median value. According to the White House, that would apply to about one in four census tracts.
Will enough investors be interested in making a dent in the housing shortage? We'll be keeping an eye out and keep you updated. When it comes to increasing housing inventory, the more innovative ideas the better.
Until tomorrow —
Sarah Wheeler
HousingWire Editor in Chief
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