Housing affordability has become a pressing issue in the United States. Despite a slowdown in rent growth, rent levels remain historically high, making it challenging for first-time buyers to afford homes. Current homeowners are also reluctant to sell and move due to nearly 7% mortgage rates.

In response, federal, state, and local governments are focusing on expanding housing availability. A new bipartisan bill, the Revitalizing Downtowns and Main Streets Act, has been introduced by Representatives Mike Carey (R-OH) and Jimmy Gomez (D-CA) in the House, with Senators Debbie Stabenow and Gary Peters sponsoring a similar version in the Senate. This legislation aims to incentivize the conversion of underused or vacant commercial properties into affordable housing through tax credits.

According to a Pew Research study, 49% of U.S. adults in October 2021 considered the availability of affordable housing a major problem, an increase from 39% in 2018. The issue is more pronounced among adults in lower-income households (57%) compared to those in middle- (47%) and upper-income (42%) households. The problem is particularly acute in the West, where 69% of adults see affordable housing as a major local issue, compared to 49% in the Northeast, 44% in the South, and 33% in the Midwest.

The proposed bill offers a 20% tax credit for converting eligible commercial buildings into affordable housing. To qualify, the commercial building must have been in use for at least 20 years before the conversion and must have been nonresidential property right before the conversion. The conversion costs must exceed either $100,000 or 50% of the building's adjusted basis.

For a building to be deemed affordable housing, at least 20% of its residential units must be rent-restricted and reserved for individuals earning no more than 80% of the area's median income over a 30-year period. The total available credit would be $15 billion, allocated by state agencies, with larger credits available in rural areas, low-income census tracts, and economically distressed areas. Developers can combine this credit with other federal tax benefits such as the Low-Income Housing Tax Credit (LIHTC), rehabilitation credit, and opportunity zone benefits.

The Real Estate Roundtable highlights that this measure could significantly increase affordable housing supply, benefiting both communities and developers by converting underutilized commercial spaces into much-needed residential units.