HR537-119

What This Bill Does

The INCREASE Housing Affordability Act uses the tax code and HUD technical assistance to make obsolete or underused commercial buildings easier to convert into housing. New Internal Revenue Code section 48F would give taxpayers a 15 percent credit for qualified conversion expenditures, limited to $200,000 per new residential unit and $10 million per qualified converted building. Buildings with at least 25 percent rent-restricted units can receive larger credit amounts: a 10 percent boost when those units serve households at or below 100 percent of area median income, 15 percent at or below 80 percent of area median income, and 20 percent at or below 60 percent of area median income. A separate 15 percent boost applies if conversion laborers and mechanics are paid prevailing wages. Qualified buildings must be substantially converted, generally through a 24-month expenditure period or a 60-month phased conversion period, and the bill excludes acquisition costs, enlargements, short leasehold terms, and most tax-exempt-use property. HUD must also create a commercial-to-residential conversion advisory board with at least 20 members to help state and local housing agencies identify feasible projects, analyze floor plans, speed permitting, reform zoning barriers, and find federal or state funding sources, backed by $5 million per year for fiscal years 2025 through 2029.

Who Benefits and How

Real estate developers benefit from a new investment tax credit for converting commercial buildings into residential use. Affordable housing tenants benefit when income-restricted units raise the credit value for qualified converted buildings. Construction workers benefit because prevailing-wage conversions qualify for an additional credit increase. State housing agencies benefit from HUD advisory board technical assistance on feasibility, permitting, zoning barriers, and financing sources.

Who Bears the Burden and How

Internal Revenue Service examiners must administer a new section 48F credit with caps, recapture interactions, qualified-expenditure rules, and phased-conversion rules. Commercial building owners must satisfy substantial-conversion, rent-restriction, wage, and depreciation requirements to claim the credit. HUD advisory board members must provide technical assistance, best practices, training, and project-selection support. Federal taxpayers bear revenue loss from the conversion credit and appropriations for the advisory board.

Key Provisions

• Creates a 15 percent commercial-to-residential conversion tax credit.
• Limits credits to $200,000 per new residential unit and $10 million per qualified converted building.
• Expands the credit for rent-restricted units serving households at 100, 80, or 60 percent of area median income.
• Expands the credit for conversions that pay laborers and mechanics prevailing wages.
• Requires HUD to establish a 20-member advisory board and authorizes $5 million per year through fiscal 2029.