Bipartisan Tax Bill Would Incentivize Real Estate Conversions
July 16, 2024
Last week, Representatives Jimmy Gomez (D-CA) and Mike Carey (R-OH) announced the introduction of the Revitalizing Downtowns and Main Streets Act, which would encourage the conversion of vacant and underutilized commercial properties into housing.
Why it matters: The bill would provide $12 billion in federal funding to encourage conversions of offices and other CRE to market-rate and affordable housing. Policymakers and borrowers have touted the measure as a potential solution to some of the issues plaguing the CRE sector.
By the numbers: According to the bill fact sheet, the program would provide a federal tax credit for 20% to 35% of eligible costs of converting commercial real estate to housing.
- The CRE conversions are not limited to office buildings, as any nonresidential real estate at least 20 years old can qualify.
- No less than 20% of residential units created by the credit are reserved for individuals whose income is at or below 80% of area median income (AMI) for a minimum of 30 years (with an option for states to require a longer affordability period).
- For difficult to develop and qualified low-income areas, affordability would be even deeper at or below 60% AMI. All of these units would be rent restricted to 30% or less of that income.
The bill is co-led by Representatives John Larson (D-CT) and Dan Kildee (D-MI), and cosponsored by Representatives Brian Fitzpatrick (R-PA), Claudia Tenney (R-NY), Terri Sewell (D-AL), David Kustoff (R-TN), Mike Kelly (R-PA), Don Beyer (D-VA), Carol Miller (R-WV), and Jimmy Panetta (D-CA). A Senate Companion bill is being led by Senator Debbie Stabenow (D-MI).
The big picture: The bipartisan House support from key members of the tax-writing Ways and Means Committee puts the bill in a strong position ahead of tax policy discussions in 2025. However, competing funding priorities and general concerns about government spending can be roadblocks to popular tax policies.
Please contact David McCarthy (dmccarthy@crefc.org) with any questions.