What is this proposed tax credit?
As high interest rates and housing prices weigh down potential home buyers, the Neighborhood Homes Investment Act could be on the way to help.
The proposed federal initiative would enable better affordability for home buyers by injecting $16 billion for adding more housing stock to the market and $10.1 billion for down payment assistance.
While it still needs to pass all three branches of government, it’s helpful to understand the legislation if it gets signed into law. Here’s what you need to know.
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What is the Neighborhood Homes Investment Act?
Introduced in 2023, the Neighborhood Homes Investment Act (NHIA) is a bipartisan bill aiming to boost housing affordability through increased development and down payment assistance.
As it currently stands, it would devote $16 billion toward the building and rehabilitation of an estimated 400,000 homes, according to a White House statement. The proposal would also allocate $10 billion in down payment assistance and a $100 million pilot program to supplement opportunities for first-generation and/or low wealth first-time homebuyers.
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“Everyone deserves a safe and affordable place to call home. Our bipartisan tax credit will drive housing investments and revitalize neighborhoods … while keeping them affordable for low- and moderate-income families,” Senator Ben Cardin (D-Md.) said in a press release. “This credit will allow individuals in these communities to build equity and wealth for their families.”
The ongoing dearth of available for-sale properties has held back the entire housing market. Coupled with the rapid mortgage rate growth from 2023, fewer borrowers can afford homeownership and fewer homeowners want to sell.
“The number of homes that are available for sale is the lowest or close to the lowest it’s ever been,” said Mortgage Bankers Association Deputy Chief Economist Joel Kan. “A lot of that has been driven by the lock-in effect — many borrowers have lower mortgage rates than what’s being offered right now, so they’re just not willing to sell or list their homes.”
Has the Biden Neighborhood Homes Investment Act been passed?
As of August 2024, the Biden Neighborhood Homes Investment Act has not been passed, so the funding is not yet available.
Congress still needs to approve the proposed legislation before the President signs it into law. There is no set timeline for the act to pass. It is possible that it could be passed in the near future, but it is also possible that it could be delayed or even defeated in the process.
“You’ve gotten real bipartisan support for the Neighborhood Homes Investment Act, which is House and Senate legislation that would essentially establish a single-family program — modeled after the multifamily Low Income Housing Tax Credit — specifically for substantial rehab in reconstruction of homes in low-to-moderate-income census tracts,” Bill Killmer, senior vice president of legislative & political affairs at the Mortgage Bankers Association, said in an interview. “The bill is probably going to have to wait until 2025 as the major consideration with a lot of tax provisions expiring from the 2017 tax reform package at the end of that year.”
Other policies in the legislative pipeline
Even more federal help for borrowers could potentially be on the way as well. Similar to the NHIA, two other notable bills intended to help home buyers hang in bureaucratic limbo.
The First-Time Home Buyer Tax Credit would provide up to $15,000 in refundable tax credit to first-time borrowers. As long as the house isn’t sold within four years, the credit won’t need to be repaid. The second is the Downpayment Toward Equity Act. If signed into law, this would give eligible first-time home buyers a $25,000 cash grant to put toward their purchase.
Help for first-time home buyers
Buying property is a major milestone and often the largest financial decision people make.
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While these proposed bills could potentially alleviate some affordability issues, plenty of helpful solutions already exist if you’re in the market to buy your first home. These come in the form of state assistance programs and special mortgages.
First-time home buyer mortgages
First-time home buyer loans are specifically designed with more favorable terms for the borrower, aimed to make homeownership more attainable.
Below is a quick rundown of these loans and their base qualifications:
| Program | Minimum Credit Score | Down Payment Requirement | Other Requirements |
| FHA Loans | 580 (with 3.5% down) | 3.5%-10% | Mortgage insurance is required. Property must meet certain standards |
| Conventional 97 | 620 | 3% | At least one borrower must be a first-time home buyer. Private Mortgage Insurance may be required |
| Home Possible | 660 | 3% | Income limits apply. Homeownership education required |
| HomeReady | 620 | 3% | Income limits apply. Homeownership education required |
| USDA Loans | 640 | 0% | Must be in a USDA-eligible rural area. Income limits apply |
| VA Loans | Varies by lender | 0% | Available to veterans, active-duty service members, and certain members of the National Guard or Reserves |
Broken down on a more local level, every state offers its own first-time home buyer program. These programs are customized to their markets, fitting the needs of the buyers within them.
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Down payment assistance programs
Additionally, down payment assistance (DPA) can provide a big hand in clearing the financial hurdles to homeownership. The best part is you don’t necessarily need to be a first-time buyer to qualify for some DPA programs.
Every state has its own DPA to potentially take advantage of, found through local housing agencies, lenders, and city and state websites.
Explore your options
The housing market would get a much needed inventory boost if the Neighborhood Homes Investment Act gets passed. It would also inject more capital into down payment assistance programs for first-time home buyers.
In the meantime, those looking to buy their first home can and should still explore their loan options and see what financial assistance they may qualify for. Following a step-by-step guide for first-time home buying can also help you set expectations and get everything you need in order.
If you’re ready to begin your path to homeownership, contact a local lender today.