INCREASE Housing Affordability Act
- Sponsor
- Rep. Sherrill, Mikie [D-NJ-11]
- Committees
- Financial Services Committee (primary)
- Last action
- Mar 5, 2026
Bottom line
The INCREASE Housing Affordability Act aims to address housing shortages and revitalize commercial districts by incentivizing the conversion of vacant office buildings into residential units through tax credits and federal support for local planning.
What it actually does
This bill establishes a new federal tax credit, the Commercial-to-Residential Credit, offering 15% of qualified conversion expenditures for transforming underutilized commercial office buildings into residential or mixed-use properties. It includes bonus credits for affordable housing and prevailing wage requirements, and sets limitations on the total credit amount per unit and per building. Additionally, the bill mandates the creation of a HUD advisory board to provide technical assistance to state and local agencies on facilitating these conversions.
Proponents argue
Proponents argue that this bill provides a crucial financial incentive to unlock a significant source of new housing supply, particularly in urban areas facing both housing crises and underutilized commercial real estate. They contend that converting vacant office spaces can efficiently create housing, reduce urban sprawl, and revitalize downtowns while also promoting affordable housing and fair wages through bonus credits.
Opponents contend
Opponents might argue that the tax credit could be overly generous, potentially subsidizing conversions that would occur anyway or leading to inefficient use of taxpayer dollars. Concerns could also be raised about the administrative complexity of the credit, the potential for gentrification if not carefully managed, or whether the proposed incentives are sufficient to overcome the significant logistical and financial hurdles of such conversions.
The bill is relatively short and its core provisions are clearly laid out, making it accessible for a reader to understand its main intent and mechanisms within a reasonable timeframe.
Section 2(b), adding new Section 48F to the Internal Revenue Code of 1986.
Establishment of Commercial-to-Residential Credit
This provision creates a new tax credit equal to 15% of the costs associated with converting eligible commercial office buildings into residential or mixed-use properties. It defines what constitutes a "qualified converted building" (e.g., nonresidential, at least 15 years old, substantially converted) and "qualified conversion expenditures" (capital costs for depreciable property related to the conversion). The credit is capped at $200,000 per new residential unit and $10,000,000 per building.
Supporters argue
Supporters argue this credit directly addresses the financial viability gap often associated with complex commercial-to-residential conversions, making more projects feasible and accelerating the creation of much-needed housing.
Critics contend
Critics might contend that the 15% credit is either too low to make a substantial difference for truly challenging projects or too high for projects that might have proceeded without the incentive, leading to inefficient government spending.
Tradeoffs
The provision balances the need for significant financial incentives to spur conversions against the potential cost to federal revenue and the risk of subsidizing projects that would have happened anyway.
Section 2(d)(1), amending new Section 48F(d)(1).
Affordable Housing Bonus for Conversions
This bonus increases the base tax credit by an additional 10%, 15%, or 20% if a qualified converted building dedicates at least 25% of its residential units to rent-restricted housing for individuals earning below 100%, 80%, or 60% of the area median income, respectively. The rules for income and rent restrictions are similar to those used for the Low-Income Housing Tax Credit (Section 42(g)).
Section 2(d)(2), amending new Section 48F(d)(2).
Prevailing Wage Requirement for Bonus Credit
This provision offers an additional 15% increase to the base tax credit if the taxpayer certifies that all laborers and mechanics involved in the conversion process were paid wages at rates not less than the prevailing rates for similar construction work in the locality, as determined by the Secretary of Labor. This aligns with existing federal prevailing wage standards.
Section 3
Establishment of HUD Advisory Board for Conversions
This section directs the Secretary of Housing and Urban Development (HUD) to establish an advisory board within one year of the bill's enactment. The board, composed of at least 20 members, will provide logistical support, technical assistance, best practices, and training to state and local housing agencies. Its duties include helping identify suitable buildings for conversion, conducting feasibility analyses, expediting regulatory and permitting processes, reforming local zoning barriers, and identifying funding sources for conversion projects.
A building is "substantially converted" if qualified conversion expenditures over a 24-month period exceed the greater of its adjusted basis or $15,000. For phased conversions (with architectural plans), this period extends to 60 months.
Section 2(e)(1)(B)
Why it matters:This is standard legislative practice for defining eligibility criteria for tax credits, ensuring precision and preventing abuse.
Case for: Supporters would argue that these specific thresholds and timelines are necessary to ensure that the tax credit is only applied to genuine and significant conversion projects, preventing minor renovations from qualifying. The phased conversion rule acknowledges the reality of large, complex projects.
Case against: Critics might argue that the $15,000 threshold is too low and could allow for projects that are not truly "substantial" to qualify, or that the adjusted basis calculation could be complex for older buildings, creating administrative burdens.
Estimated impact: This definition directly determines which projects are eligible for the tax credit, influencing potentially billions in tax expenditures over time.
A credit under this new section is not allowed for any qualified conversion expenditure for which a credit is already allowed under Section 42 (Low-Income Housing Tax Credit) or Section 47 (Rehabilitation Credit).
Section 2(g), adding new Section 48F(g).
Why it matters:This is standard legislative practice to prevent taxpayers from claiming multiple federal benefits for the same expenditures, ensuring fiscal responsibility and preventing unintended windfalls.
Case for: Proponents would argue this is a necessary anti-abuse provision, preventing "double-dipping" and ensuring that federal resources are distributed efficiently across different incentive programs.
Case against: No specific opposition is typically raised against anti-double-dipping provisions, as they are generally seen as good governance. However, some might argue that allowing stacking of credits could accelerate conversions even further, though this is a policy choice, not an opposition to the provision itself.
Estimated impact: Prevents potentially billions in duplicate tax claims, ensuring the integrity of federal tax incentives.