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HOPE Act Would Expand Tax Incentives for Affordable Housing Investment and Preservation

HOPE Act Would Expand Tax Incentives for Affordable Housing Investment and Preservation

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New Bill Would Ease Passive Loss Rules, Speed Write-Offs for Affordable Housing

On the heels of the passage of H.R. 6644, a new federal affordable housing law, tax-writing committee member Rep. Mike Carey (R-Ohio) has introduced related legislation to create tax incentives for housing investments. His plan includes relaxation of the passive loss and profit motive rules, and a new category of accelerated depreciation for residential rental property.

The bipartisan new law, passed by Congress but never signed by the President, modernizes existing federal housing programs, restricts private equity acquisitions of homes and boosts community banks. It does not, however, include tax incentives. That’s where Rep. Carey’s plan takes over.   

The proposed Housing Opportunities and Preservation Enhancement Act of 2026, H.R. 9573, focuses on renovation of older, existing rental properties to preserve them as affordable housing, according to Carey. The HOPE bill would make the following changes:

Tax Incentives

  • Exempt individual investors from the passive loss rules.
  • Exempt individual investors from profit-motive requirements.
  • Create a special 15-year accelerated depreciation recovery period for affordable residential rental housing. (The current write-off is over 27.5 years.)
  • Make conforming changes to the rules regarding nonrecourse financing, debt allocation and the at-risk rules. It specifically includes financing from tax-exempt entities as qualified financing.  

Note that the passive loss and profit motive exemptions would allow investors to deduct their losses against other income.

Qualified Properties

The provisions would apply to “residential rental of qualified property”, with these requirements:

  • Residential rental buildings must be at least 15 years old.
  • Properties must undergo significant rehabilitation (at least $20,000 per unit or 20% of the building’s adjusted basis).
  • Properties must be owned and managed by partnerships involving non-profit, government or tribal entities.
  • At least 70% of the units must be rent-restricted for families making 80% or less of the local area median income.

10-Year Right of Refusal

The legislation is designed to ensure long-term preservation by giving non-profit or government buyers a 10-year right of first refusal to purchase the properties at below-market prices. It also sets the basis of such property at its fair market value on the date of disposition, thereby erasing any gain.

Industry Support

The low-income housing industry and coalition groups focused on low-income housing quickly threw their support behind the proposed bill. “The proposed HOPE Act recognizes that we can’t solve that challenge by building alone. We also have to preserve the affordable homes we already have, and this bill gives us an innovative new way to do exactly that,” observed Michael Ruane, President of National CORE, a nonprofit affordable housing developer.

Novogradac & Company was quick to follow. They are a leading financial services firm specializing in affordable housing, in particular, the low-income housing credit. Significantly, the HOPE bill provides incentives to properties that have aged out of the low-income housing credit. 

Public Law 119-21 (the “OBBBA”) permanently increased the state allocation ceiling for low-income housing credits and lowered the bond-financing threshold for projects financed by bonds. The credit is allowed over a 10-year period for the costs of building or rehabilitating rental housing occupied by low-income tenants. These changes do not facilitate renovation of older properties the way the proposed HOPE bill would.

Extent of Problem

According to the National Low Income Housing Coalition, no state has an adequate supply of affordable rental housing for the lowest-income renters. It’s GAP report observes that there is a shortage of 7.2 million affordable and available rental homes for 11 million extremely low-income renter households. Further, only 35 affordable and available rental homes exist for every 100 of lowest-income renters.

The non-tax affordable housing legislation is one of the only significant bills passed by Congress in the last year, and it had wide bipartisan support. The proposed HOPE bill would take it a step further, giving it at least some chance of consideration by lawmakers in the near future.

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