Revitalizing Downtowns and Main Streets Act
- Sponsor
- Rep. Carey, Mike [R-OH-15]
- Committees
- Ways and Means Committee (primary)
- Last action
- Mar 27, 2025
Bottom line
This bill aims to incentivize the conversion of vacant commercial properties into affordable housing units through a significant federal tax credit program, managed by state agencies.
What it actually does
This bill creates a new federal tax credit, the "Affordable Housing Conversion Credit," equal to 20% of qualified expenditures for converting eligible non-residential buildings into affordable housing. The credit is capped at a national level and allocated by state housing credit agencies, with additional amounts for economically distressed areas and enhanced benefits for projects in qualified census tracts, difficult development areas, or historic preservation projects in rural areas. It also makes this new credit transferable.
Proponents argue
Supporters argue this bill addresses the dual challenges of underutilized commercial real estate and the nationwide shortage of affordable housing by providing a powerful financial incentive for developers. They contend it could revitalize downtowns, create jobs, and offer housing solutions in areas with existing infrastructure more efficiently than new construction.
Opponents contend
Critics might argue that tax credits can be inefficient or lead to unintended market distortions, potentially benefiting developers more than directly addressing housing affordability. Concerns could also be raised about the administrative burden on state agencies and the potential for the credit to be claimed for projects that would have occurred anyway, or that the affordability requirements are not deep enough.
The bill is moderately complex due to its integration with the Internal Revenue Code and detailed allocation rules, requiring careful reading to understand its full implications.
Section 2(a), inserting new Section 48F(a) into the Internal Revenue Code.
Establishes 20% Investment Credit for Qualified Conversions
This provision creates a new tax credit equal to 20% of the costs associated with converting eligible non-residential buildings into qualified affordable housing. This credit is designed to reduce the financial burden on developers undertaking such projects, making them more economically viable by directly reducing their tax liability.
Supporters argue
Supporters argue that a 20% credit provides a substantial incentive, making otherwise cost-prohibitive conversions feasible and attracting private capital to address housing shortages.
Critics contend
Critics might contend that the 20% rate could be either too high, leading to excessive profits for developers, or too low to genuinely stimulate conversions in high-cost areas without additional subsidies.
Tradeoffs
Balances the need for a strong incentive to encourage conversions against potential federal revenue loss and the risk of over-subsidization.
Section 2(a), new Section 48F(b).
Defines Eligible Costs for the Credit
This section specifies what costs qualify for the 20% credit. It includes capital expenditures for depreciable property related to the conversion, but explicitly excludes the cost of acquiring the building itself and expenditures outside a 2-year conversion period. It also includes brownfield cleanup costs and coordinates with the existing rehabilitation credit.
Section 2(a), new Section 48F(c).
Criteria for Eligible Buildings and Conversion Scope
This provision defines a "qualified conversion" as one where expenditures exceed the greater of 50% of the building's adjusted basis or $100,000. An "eligible commercial building" must be at least 20 years old and have been non-residential real property immediately prior to conversion. These criteria ensure the credit targets substantial projects involving older commercial stock.
Section 2(a), new Section 48F(d).
Affordable Housing Set-Aside and Rent Restrictions
To qualify for the credit, a building must ensure that for a 30-year period, at least 20% of its residential units are both rent-restricted and reserved for individuals earning 80% or less of the area median income. Rules similar to Section 42 (Low-Income Housing Tax Credit) apply for these limitations, ensuring consistent application of affordability standards.
Section 2(a), new Section 48F(e).
National Cap and State-Level Credit Allocation
This section establishes a national qualified conversion credit limitation of $12 billion, with an additional $3 billion for projects in economically distressed areas. These amounts are allocated to states based on population, and state housing credit agencies are responsible for further allocating credits to specific buildings based on a conversion credit allocation plan, ensuring local control over project selection.
Section 2(a), new Section 48F(g).
Enhanced Credit for Projects in Distressed Areas or Historic Rural Areas
This provision increases the credit rate to 30% for projects in qualified census tracts or difficult development areas if 20% of units are reserved for individuals at 60% or less of area median income. It also allows a 35% credit for up to $2 million in expenditures for historic preservation projects in rural areas, providing additional incentives for specific types of projects.
Section 2(b), amending Section 6418(f)(1)(A).
Allows Transfer of Affordable Housing Conversion Credit
This amendment makes the new affordable housing conversion credit transferable, meaning taxpayers who earn the credit but cannot fully utilize it due to insufficient tax liability can sell it to other taxpayers. This increases the liquidity and value of the credit, making it more accessible to a broader range of developers.
Establishes a mechanism for reallocating unused qualified conversion credit dollar amounts from "undersubscribed States" to "oversubscribed States" after December 31, 2028. This ensures that the national credit capacity is fully utilized.
Section 2(a), new Section 48F(e)(2)(D).
Why it matters:This is standard legislative practice to include mechanisms for optimizing resource utilization over time and ensuring program efficiency.
Case for: Supporters argue this ensures that federal tax credit capacity is fully utilized by directing unused allocations to states with higher demand, maximizing the impact of the program and preventing credits from going unclaimed.
Case against: Critics might contend that it could penalize states that are slower to establish their programs or have unique market conditions, potentially leading to a "use it or lose it" mentality that could rush projects or reduce flexibility.
Estimated impact: Could reallocate a significant portion of the $12 billion national cap if some states do not fully utilize their initial allocations, potentially shifting billions in credit availability.
Grants the Secretary of the Treasury broad authority to issue regulations and guidance, including for recapture of the credit, certifications, coordination with other credits, information reporting, and encouraging allocations to non-metropolitan counties. This delegation shapes the practical implementation of the entire credit program.
Section 2(a), new Section 48F(h).
Why it matters:It is standard legislative practice to delegate detailed rulemaking to the executive branch, as Congress often sets broad policy and agencies fill in the operational specifics.
Case for: Proponents argue this flexibility is essential for effective implementation, allowing the Treasury to adapt the program to unforeseen challenges and refine its operation based on experience and market conditions.
Case against: Critics might express concern that broad regulatory authority could lead to interpretations that deviate from congressional intent or create undue burdens for stakeholders, potentially altering the program's intended impact.
Estimated impact: The specific rules and guidance issued by the Secretary will significantly shape the practical application, accessibility, and effectiveness of the credit, influencing billions in investment.