Short title, etc

(a)

Short title

This Act may be cited as the

Workforce Housing Act of 2006

. (b)

Table of contents

The table of contents for this Act is as follows:

Sec. 1. Short title, etc.

Sec. 2. Congressional findings.

Sec. 3. Mortgage down payment accounts.

Sec. 4. Refundable credit for contributions to mortgage down payment accounts.

Sec. 5. Amendments to American Dream Downpayment Initiative.

Sec. 6. Production of affordable home ownership housing.

Congressional findings

The Congress finds that— (1)home prices have increased nationally an average 50 percent in the past five years; (2)in 2005, the median price for a home in the United States was $213,900, but only about 11 percent of the adult population in the country could afford to purchase such a home; (3)as a result of such prohibitive housing costs, employers often cannot maintain or retain a pool of qualified workers to fill jobs; (4)rising energy costs add to the burden that working families face when trying to purchase a home; (5)in 2005, families in the United States spent, on average, $4,300 on all energy costs (including home energy bills and gasoline), which is approximately $600 more than they spent on such costs in 2004; (6)residential appliances, including heating and cooling equipment and water heaters, consume 90 percent of all energy used in the residential sector in the United States; (7)homes and appliances that fail to use energy efficiently cost on average $500 per year to operate and require over 30 percent more resources, further increasing the dependence on fossil fuels, and jeopardizing the energy security, of the United States; (8)within 15 years, renewable energy could be generating enough electricity to power 40,000,000 homes and offset 70 days of oil imports into the United States; (9)when workers can use nearby mass transit, instead of driving to work, toxic greenhouse gases that contribute to global warming are reduced by 77 pounds per person per year; and (10)to ensure there is an adequate supply of workforce housing and reduce some of the negative affects of high energy demands, it is critical to provide incentives for producing affordable homes that are close to transportation hubs and make the best use of efficient, renewable energy.

Mortgage down payment accounts

(a)

In general

Part VII of subchapter B of chapter 1 of the Internal Revenue Code of 1986 (relating to additional itemized deductions for individuals) is amended by redesignating section 224 as section 225 and by inserting after section 223 the following new section:

224.

Mortgage down payment accounts

(a)

Allowance of deduction

(1)

In general

In the case of an individual, there shall be allowed as a deduction for the taxable year an amount equal to the aggregate amount paid in cash during such taxable year by the taxpayer to the mortgage down payment account of the taxpayer. (2)

Dollar limitation

(A)

In general

The amount allowed as a deduction under subsection (a) with respect to the taxpayer for any taxable year shall not exceed the applicable dollar limit. (B)

Applicable dollar limit

(i)In the case of a taxpayer whose modified adjusted gross income for the taxable year does not exceed 125 percent of area median income, the applicable dollar limit shall be equal to $10,000. (ii)In the case of any other taxpayer, the applicable dollar limit shall be zero. (C)

Area median income

For purposes of subparagraph (B)— (i)

In general

The area median income means the area median income determined by the Secretary of Housing and Urban Development for the calendar year ending with or within the taxable year of the taxpayer. (ii)

Taxpayer residing in more than 1 area for the taxable year

In the case that the taxpayer had more than one principal residence during the taxable year, the area median income means the sum of the residing percentage of the area median income for each area in which the taxpayer had a principal residence during the taxable year. (iii)

Residing percentage

For purposes of clause (ii), the term residing percentage means the ratio of the number of days that the taxpayer had his principal residence in an area bears to 365. (D)

Modified adjusted gross income

The term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (3)

Coordination with mortgage down payment credit

No amount shall be allowed as a deduction under paragraph (1) to the taxpayer if a credit is allowed under section 36 for the taxable year. (4)

Deduction not allowed to dependents

A deduction shall not be allowed to an individual for a taxable year under paragraph (1) if such individual is a dependent for whom a deduction is allowable under section 151 to another taxpayer for any taxable year beginning in the same calendar year in which such individual’s taxable year begins. (b)

Definitions

For purposes of this section— (1)

Mortgage down payment account

The term mortgage down payment account means a trust created or organized in the United States exclusively for the purpose of paying the qualified expenses of a taxpayer, but only if the written governing instrument creating the trust meets the following requirements: (A)No contribution will be accepted— (i)unless it is in cash, or (ii)except in the case of rollover contributions and contributions under section 36(b)(3)(B), if such contribution would result in aggregate contributions for the taxable year exceeding the amount allowed as a deduction under subsection (a). (B)The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any individual retirement plan. (C)No part of the trust assets will be invested in life insurance contracts. (D)The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund. (2)

Qualified expenses

The term qualified expenses means with respect to a principal residence of the taxpayer who is a first-time homebuyer— (A)the costs of acquiring, constructing, or reconstructing the residence, including any usual or reasonable settlement, financing, or other closing costs qualified acquisition costs, (B)the cost of repairing or replacing major structural components of the residence, and (C)the costs of purchasing a major appliances for service in the residence. (3)

First-time homebuyer

(A)

In general

The term first-time homebuyer means any individual if— (i)such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 2-year period ending on the date of acquisition of the principal residence to which this subsection applies, and (ii)subsection (h) or (k) of section 1034 (as in effect on the day before the date of the enactment of this paragraph) did not suspend the running of any period of time specified in section 1034 (as so in effect) with respect to such individual on the day before the end of the period specified in clause (i). (B)

Principal residence

The term principal residence has the same meaning as when used in section 121. (C)

Date of acquisition

The term date of acquisition means the date— (i)on which a binding contract to acquire the principal residence to which subparagraph (A) applies is entered into, or (ii)on which construction or reconstruction of such a principal residence is commenced. (c)

Tax treatment of account

(1)

In general

A mortgage down payment account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, the mortgage down payment account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations). (2)

Account terminations

Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any mortgage down payment account. (d)

Tax treatment of distributions

(1)

In general

Any distribution shall be includible in the gross income of the distributee in the manner as provided in section 72. (2)

Qualified distributions

(A)

Exclusion

Any qualified distribution from a mortgage down payment account shall not be includible in gross income. (B)

Qualified distribution

For purposes of this paragraph— (i)

In general

The term qualified distribution means any payment of distribution— (I)if the qualified expenses of the designated beneficiary during the taxable year are not less than the aggregate distributions during the taxable year, (II)made on or after the date on which the individual attains age 59½, (III)made to a beneficiary (or to the estate of the individual) on or after the death of the individual, or (IV)attributable to the individual’s being disabled (within the meaning of section 72(m)(7). (C)

Distributions in excess of expenses

(i)

In general

If such aggregate distributions exceed such expenses during the taxable year, the amount otherwise includible in gross income under paragraph (1) shall be reduced by the amount which bears the same ratio to the amount which would be includible in gross income under paragraph (1) (without regard to this subparagraph) as the qualified expenses bear to such aggregate distributions. (ii)

Mortgage grant programs, etc

The amount of qualified expenses otherwise taken into account under subparagraph (B) with respect to an individual shall be reduced by any payment for such expenses which is excludible from gross income under any law of the United States. (3)

Additional tax for distributions not used for qualified expenses

(A)

In general

The tax imposed by this chapter for any taxable year on any taxpayer who receives a payment or distribution from a mortgage down payment account which is includible in gross income shall be increased by 10 percent of the amount which is so includible. (B)

Contributions returned before certain date

Subparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of the designated beneficiary if— (i)such distribution is made before the first day of the sixth month of the taxable year following the taxable year, and (ii)such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in gross income for the taxable year in which such excess contribution was made.

(4)

Rollover contributions

Paragraph (1) shall not apply to any amount paid or distributed from a mortgage down payment account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another mortgage down payment account for the taxpayer. The preceding sentence shall not apply to any payment or distribution if such paragraph applied to any prior payment or distribution during the 12-month period ending on the date of the payment or distribution. (e)

Recapture

The Secretary shall, by regulations, provide for recapturing the benefit provided under this section and section 36 with respect to any property which ceases to be the principal residence of the taxpayer before the end of the 15-year period beginning on the last date on which amounts were excluded from gross income under subsection (d)(2) with respect to such property. Such regulations shall provide exceptions in the case of the divorce, disability, or death of the taxpayer. (f)

Community property laws

This section shall be applied without regard to any community property laws. (g)

Custodial accounts

For purposes of this section, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in section 408(n) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will administer the account will be consistent with the requirements of this section, and if the custodial account would, except for the fact that it is not a trust, constitute an account described in subsection (b)(1). For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be treated as the trustee thereof. (h)

Reports

The trustee of a mortgage down payment account shall make such reports regarding such account to the Secretary and to the beneficiary of the account with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required.

(b)

Deduction allowed whether or not individual itemizes other deductions

Subsection (a) of section 62 of such Code is amended by inserting before the last sentence at the end the following new paragraph:

(21)

Mortgage down payment account

The deduction allowed by section 224.

(c)

Prohibited transactions

(1)

Exception for taxable distributions from mortgage down payment accounts

Subsection (c) of section 4975 of such Code (defining to prohibited transaction) is amended by adding at the end the following new paragraph:

(7)

Special rule for mortgage down payment accounts

An individual for whose benefit a mortgage down payment account is established and any contributor to such account shall be exempt from the tax imposed by this section with respect to any transaction concerning such account (which would otherwise be taxable under this section) if section 224(d)(3) applies with respect to such transaction.

(2)

Plan defined

Paragraph (1) of section 4975(e) of such Code is amended by striking or at the end of subparagraph (F), by striking the period at the end of subparagraph (G) and inserting , or, and by inserting after subparagraph (G) the following new subparagraph:

(H)a mortgage down payment account described in section 224.

(d)

Excess contributions

(1)

In general

Section 4973(a) of such Code relating to tax imposed) is amended by striking or at the end of paragraph (4), by inserting or at the end of paragraph (5), and by inserting after paragraph (5) the following new paragraph:

(6)a mortgage down payment account (within the meaning of section 224(b)(1)).

(2)

Excess contributions to mortgage down payment accounts

Section 4973 of such Code (relating to tax on excess contributions to certain tax-favored accounts and annuities) is amended by adding at the end the following new subsection:

(h)

Excess contributions to mortgage down payment accounts

For purposes of this section— (1)

In general

In the case of contributions to a mortgage down payment account, the term excess contributions means the sum of— (A)the excess (if any) of— (i)the amount contributed for the taxable year to the accounts (other than a rollover contribution described in section 224(d)(4) and contributions under section 36(c), over (ii)the amount allowable as a deduction under section 224 for such contributions or as a credit under section 36 for such contributions, as the case may be, and (B)the amount determined under this subsection for the preceding taxable year, reduced by the sum of— (i)the distributions out of the accounts for the taxable year (other than rollover distributions), and (ii)the excess (if any) of the maximum amount which may be contributed to the accounts for the taxable year over the amount contributed to the accounts for the taxable year. (2)

Special rules

For purposes of paragraph (1), the following contributions shall not be taken into account: (A)Any contribution which is distributed out of the mortgage down payment account in a distribution to which section 224(d)(3)(B) applies. (B)Any rollover contribution.

(e)

Penalty on failure to report

Paragraph (2) of section 6693(a) of such Code (relating to provisions) is amended by striking and at the end of subparagraph (D), by striking the period at the end of subparagraph (E) and inserting , and, and by inserting after subparagraph (E) the following new subparagraph:

(F)section 224(g) (relating to mortgage down payment accounts).

(f)

Conforming amendments

(1)Section 26(b)(2) of such Code is amended by striking and at the end of subparagraph S, by striking the period at the end of subparagraph (T) and inserting , and, and by inserting after subparagraph (T) the following new subparagraph:

(U)section 224(d)(3) (relating to additional tax for distributions not used for qualified expenses).

(2)Section 72(t)(8)(C) of such Code is amended by inserting at the end the following new sentence: Such costs shall not include any amount taken into account under section 224.. (g)

Clerical amendments

The table of sections for part VII of subchapter B of chapter 1 of such Code is amended by redesignating the item relating to section 224 as an item relating to section 225 and by inserting after the item relating to section 223 the following new item:

Sec. 224. Mortgage down payment accounts.

(h)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2006.

Refundable credit for contributions to mortgage down payment accounts

(a)

In general

Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating section 36 as section 37 and by inserting after section 35 the following new section:

36.

Contributions to mortgage down payment accounts

(a)

General rule

In the case of an individual, there shall be allowed as a credit against the tax imposed by this chapter an amount equal to the amount contributed by the individual to any mortgage down payment account of the taxpayer. (b)

Limitation based on modified adjusted gross income

(1)

In general

The amount allowed as a credit under subsection (a) with respect to the taxpayer for any taxable year shall not exceed the applicable dollar limit. (2)

Applicable dollar limit

(A)

In general

In the case of a taxpayer whose modified adjusted gross income for the taxable year does not exceed 100 percent of area median income, the applicable dollar limit shall be equal to $2,500 ($5,000 in the case of a joint return). (B)

No credit for incomes in excess of limit

In the case of any other taxpayer, the applicable dollar limit shall be zero. (3)

Area median income

For purposes of paragraph (2)— (A)

In general

The area median income means the area median income determined by the Secretary of Housing and Urban Development for the calendar year ending with or within the taxable year of the taxpayer. (B)

Taxpayer residing in more than 1 area for the taxable year

Residing percentage

For purposes of subparagraph (B), the term residing percentage means the ratio of the number of days that the taxpayer had his principal residence in an area bears to 365. (4)

Modified adjusted gross income

For purposes of this subsection, the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933. (c)

One-time Federal match

(1)

In general

In the case of a taxpayer for whom an election is in effect under this subsection for any taxable year, the amount allowed as a credit under subsection (a) shall be increased by $500. (2)

Completion of home ownership counseling course

A individual may not make an election under this subsection unless the individual (and if married, such individual’s spouse) has completed the home ownership counseling under a program that meets the requirements under section 271(c)(2)(C) of the Cranston-Gonzalez National Affordable Housing Act. (3)

Election applies only to 1 taxable year

An election to have paragraph (1) apply with respect to any eligible individual may not be made for any taxable year if such an election is in effect with respect to such individual for any other prior taxable year. (4)

Taxpayer must not have deficiency

Under regulations prescribed by the Secretary, an election under this subsection shall not be effective for any taxable year for which the taxpayer has unpaid tax or a deficiency. (d)

Deposit of credit amounts in mortgage down payment account

(1)

In general

Notwithstanding any other provision of this title— (A)no amount shall be allowed as a credit under this section unless the taxpayer designates a mortgage down payment account into which such credit can be contributed, and (B)the entire amount of the credit allowed under this section shall be treated as an overpayment described in section 6401(b). (2)

Credit deposited into account

The Secretary shall deposit by electronic funds transfer into such designated mortgage down payment account the amount treated as an overpayment under paragraph (1)(B). (3)

Joint returns

In the case of a payment under this subsection with respect to a joint return, half of such payment shall be treated as having been made to each individual filing such return. (e)

Credit not allowed to dependents

A credit shall not be allowed to an individual for a taxable year under subsection (a) if such individual is a dependent for whom a deduction is allowable under section 151 to another taxpayer for any taxable year beginning in the same calendar year in which such individual’s taxable year begins.

(b)

Conforming Amendments

(1)Section 72(t)(8)(C) of such Code is amended by inserting or 36 before the period at the end. (2)Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period , or from section 36 of such Code. (3)The table of sections for subpart C of part IV of chapter 1 of the Internal Revenue Code of 1986 is amended by redesignating the item relating to section 36 as an item relating to section 37 and by inserting before the item relating to section 37 the following new item:

Sec. 36. Contributions to mortgage down payment accounts.

(c)

Effective date

The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2006.

Amendments to American Dream Downpayment Initiative

(a)

Home ownership counseling requirement

Section 271(c) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(c)) is amended— (1)in paragraph (1), by adding at the end the following new subparagraph:

(C)

Home ownership counseling

Providing home ownership counseling that meets the requirements of paragraph (2)(C) for families who are provided downpayment assistance under this section.

(2)in paragraph (2), by adding at the end the following new subparagraph:

(C)

Home ownership counseling requirement

Downpayment assistance under this section may not be provided under this section on behalf of a family unless the family has completed a program of counseling with respect to the responsibilities and financial management involved in home ownership that is approved by the Secretary and includes counseling regarding strategies to save money, qualifying for a mortgage loan, methods to avoid predatory lenders and foreclosure, and, where appropriate by region, any requirements and costs regarding obtaining flood or other disaster-specific insurance coverage.

(b)

Amount and use of downpayment assistance

Section 271(c) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(c)) is amended— (1)in paragraph (1)(A), by inserting after the period at the end the following: Such assistance may be used to pay the principal obligation of a mortgage loan, taxes, insurance, service charges, appraisal, and any other fees in connection with acquisition of a principal residence.; and (2)in paragraph (2)(A)— (A)in clause (i), by striking 6 percent and inserting 10 percent; and (B)in clause (ii), by striking $10,000 and inserting $15,000. (c)

Priority for certain populations

Section 271(c)(2) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(c)(2)), as amended by the preceding provisions of this section, is further amended by adding at the end the following new subparagraph:

(D)

Authority for jurisdiction to provide priority for certain populations

In providing assistance with amounts from a grant under this section, a participating jurisdiction may, in the discretion of the jurisdiction, provide priority for such assistance to certain categories of eligible low-income families, who may include elderly persons, members of the Armed Forces, teachers, first responders, other service workers, persons displaced by natural disasters or governmental actions, nurses or other health care providers, or any other categories of eligible low-income families that the participating jurisdiction considers appropriate.

(d)

Definition of first-time homebuyer

Section 271(a) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(a)) is amended— (1)by resdesignating paragraphs (2) through (4) as paragraphs (2) through (5), respectively; and (2)by inserting after paragraph (1) the following new paragraph:

(2)

First-time homebuyer

The term first-time homebuyer has the meaning given such term in paragraph (14) of section 104, except that an individual may not be excluded from consideration as a first-time homebuyer under such paragraph on the basis that the individual— (A)owns or owned a home with, or resided in a home owned by, a spouse, former spouse, or other person if such individual no longer resides in such home and was a victim of domestic abuse (as such term is defined in section 40002 of the Violence Against Women Act of 1994 (42 U.S.C. 13925)) from such spouse, former spouse, or other person; or (B)owns or owned, as a principal residence during the 3-year period referred to in such paragraph, a home from which such person is displaced as a result of a government action other than eviction from public housing assisted under title I of the United States Housing Act of 1937 (42 U.S.C. 1437 et seq.).

(e)

Period of affordability

Paragraph (2) of section 271(f) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821) is amended by inserting before the period at the end the following: , except that any housing purchased with downpayment assistance under this section shall meet the affordability requirements under section 215(b) and the regulations issued under such section for a minimum period of 15 years, regardless of the amount of such downpayment assistance provided. (f)

Report

Subsection (h) of section 271 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821) is amended— (1)by striking June 30, 2006 and inserting June 30 of each year ; and (2)by adding after and below paragraph (2) the following:

The report under this subsection shall include information regarding the quality and quantity of housing purchased using assistance made available under this section, the amount of assistance provided per family, the incomes of the families assisted, the amount of time that low-income families assisted under this section continue to reside in housing purchased with such assistance, the quality of home ownership counseling provided in connection with such assistance, the types of priorities established by participating jurisdictions pursuant to subsection (c)(2)(D), and the benefits to such jurisdictions resulting from establishing such priorities.

(g)

Authorization of appropriations

Subsection (k) of section 271 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(k)) is amended by striking 2007 and inserting the following: 2006 and $200,000,000 for each of fiscal years 2007 through 2014.

Production of affordable home ownership housing

(a)

Program authority

The Secretary of Housing and Urban Development shall carry out a program to make grants to units of general local government to provide financial assistance to developers for the production of housing for home ownership that meets the requirements of this section and is affordable to low- and moderate-income families. (b)

Grant and assistance amounts

The Secretary shall establish limitations— (1)regarding the amount of a grant that may be made under this section to a unit of general local government; and (2)the portion of the total development costs of housing to be constructed using such grant amounts that may be funded with such grant amounts. (c)

Affordable dwelling units

Amounts from a grant under this Act may be used only for costs involved in the development of housing of which not less than 25 percent of the single-family dwelling units are affordable dwelling units that meet the following requirements: (1)

Home ownership

Such affordable dwelling units shall be made available only for purchase by the occupying family, which may include ownership of a one-family unit in a condominium project and an undivided interest in the common areas or a membership interest and occupancy agreement in cooperative housing project, and may not be made available for rental. (2)

Low- and moderate-income limitations; principal residence

Such affordable dwelling units shall be available for purchase by a family who is a first-time homebuyer, for use only as the principal residence of such family, as follows: (A)

Low-income units

Not less than 15 percent shall be available for purchase only by low-income families. (B)

Moderate-income units

Not less than 10 percent shall be available for purchase only by moderate-income families. (3)

Affordability

Such affordable dwelling units shall be made available for purchase at an initial purchase price that does not exceed such percentage of the median purchase price for the area in which the housing is located, as the grantee unit of general local government shall provide, with adjustments based on the size of the dwelling unit as the unit of general local government considers appropriate. (4)

Resale restrictions

Such affordable dwelling units shall be subject to resale and recapture restrictions that are established by the grantee unit of general local government and determined by the Secretary to comply with the requirements for such restrictions under section 215(b)(3) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12745(b)(3)). (5)

Priority for certain populations

The grantee unit of general local government may require that priority be given, among prospective purchasers of such affordable dwelling units, to certain categories of low- and moderate-income families otherwise eligible to purchase such dwelling units, who may include elderly persons, members of the Armed Forces, teachers, first responders, other service workers, persons displaced by natural disasters or governmental actions, nurses or other health care providers, or any other categories of eligible low-income families that the unit of general local government considers appropriate. (6)

Location

Except as provided in subsection (d), such affordable dwelling units shall be located together with and among the other dwelling units developed using amounts from a grant under this section. (d)

Increase in affordable units for flexibility in location

A unit of general local government may provide that the affordable dwelling units developed using amounts from a grant under this section are located at a site separate from the site of other dwelling units developed using such grant amounts, but only if the unit of general local government requires that the percentage of affordable dwelling units developed using such grant amounts is greater than the percentage specified in subsection (c). (e)

Mixed income requirements

Any housing constructed in whole or in part with amounts from a grant under this Act to a unit of general local government shall meet such requirements regarding income eligibility as such unit shall establish to ensure that the families purchasing such housing include a broad range of incomes. (f)

Code compliance

All dwelling units in any housing constructed in whole or in part with amounts from a grant under this Act shall comply with all applicable Federal, State, and local law, regulations, and requirements relating to housing construction, quality, and safety, including any requirements regarding earthquake- or windstorm-resistant construction. (g)

Cost limits

(1)

In general

Each unit of general local government that receives a grant under this section shall establish limitations on the amount of grant funds that may be invested in housing constructed with such funds on a per unit basis. Such limits may be established on a market-by-market basis, with adjustments made for the number of bedrooms in a dwelling unit, and shall reflect the actual cost of new construction of housing that complies with subsection (f). Adjustments of such cost limitations may be made over time to reflect inflation. (2)

Criteria

The Secretary shall ensure that the cost limitations established by each unit of general local government— (A)provide for development of nonluxury housing with appropriate amenities; (B)facilitate compliance with the mixed-income requirement under subsection (e). (h)

Development incentives

The Secretary may not make a grant under this section to a unit of general local government unless the Secretary determines that such unit has provided one or both of the following incentives with respect to any housing to be produced in whole or in part with such grant amounts: (1)

Excess density

The unit of general local government has provided, for such housing, such exceptions to any requirements regarding the density of housing or dwelling units located in an area, so as to encourage the production of affordable dwelling units. (2)

Regulatory flexibility

The unit of general local government has provided— (A)with respect to such housing, exceptions to existing regulatory requirements regarding housing location and construction designed to encourage the production of affordable dwelling units, which may include providing for expedited obtaining of construction permits, reduced parking requirements, reduced setbacks from streets, narrower streets, and other reduced development restrictions; and (B)financial incentives designed to encourage the production of affordable dwelling units, which may include reduced permit fees, providing subsidized construction loans, availability of publicly owned lands at reduced prices, providing mortgage financing for low- and moderate-income families purchasing such housing, and tax exemptions for such families purchasing such housing. (i)

Incentives

(1)

In general

Notwithstanding the limitation under subsection (b)(2) on the portion of the development costs of housing to be constructed using grant amounts under this section that may be funded with such grant amounts, each unit of general local government that receives a grant under this section shall provide the following incentives: (A)

Transportation

Energy efficiency

The unit of general local government shall provide that the portion of the development costs of any housing that may be so funded shall be increased by such percentage as the unit of general local government considers appropriate, subject to paragraph (2), if the unit of general local government determines that such housing complies with— (i)the standards established under the Energy Star Program under section 324A of the Energy Policy and Conservation Act (42 U.S.C. 6294a); and (ii)the requirements to be eligible for a deduction under section 179D of the Internal Revenue Code of 1986 (relating to energy efficient commercial buildings), except that, for purposes of this paragraph, subsection (c) of such section shall be applied— (I)in the case of any housing that is single-family housing, multifamily housing of three or fewer stories above grade, or modular housing, by substituting Standard 90.2-2004 of the American Society of Heating, Refridgerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America for Standard 90.1-2001, each place such standard appears; and (II)in the case of any multifamily housing of four stories or more above grade, by substituting Standard 90.1-2004 of the American Society of Heating, Refridgerating, and Air Conditioning Engineers and the Illuminating Engineering Society of North America for Standard 90.1-2001, each place such standard appears. (C)

Solar energy

Percentage limitation

The aggregate increase for any housing by reason of the operation of subparagraphs (A) through (C) of paragraph (1) may not in any case exceed 15 percent. (j)

Home ownership counseling

Amounts from a grant under this section may not be used for the development of any housing unless the unit of general local government ensures, in accordance with such requirements as the Secretary shall establish— (1)that an affordable dwelling unit in such housing will not be sold to a low- or moderate-income family unless the family has completed home ownership counseling under a program that meets the requirements under section 271(c)(2)(C) of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12821(c)(2)(C)); and (2)that participation in such a program of home ownership counseling will be made available to each such family at cost to such family not exceeding $25. (k)

Reporting

(1)

To secretary

Each unit of general local government that receives a grant under this section shall submit to the Secretary such reports as the Secretary shall require to determine the uses of grant amounts provided under this section and the effectiveness of such uses. Such reports shall contain such information as the Secretary considers necessary to determine— (A)the quality and quantity of dwelling units and affordable dwelling units developed by a unit of general local government using grant amounts under this section; (B)the amount of time taken to develop such dwelling units; (C)the number of low- and moderate-income families who have purchased such dwelling units; (D)the amount of time that such families continue to reside in such dwelling units; (E)any benefits to employers and to communities resulting from the development of such housing that is eligible for the incentive under subsection (g)(1), including benefits relating to reducing pollution and motor vehicle traffic; (F)any benefits to communities resulting from the development of any such housing that is eligible for the incentive under subsection (g)(2); and (G)the effects that provision of home ownership opportunities in such housing has had on the tax revenues of units of general local government. (2)

To Congress

The Secretary shall submit a report to the Congress not less than annually regarding the program under this section. Such report shall aggregate and summarize, for the entire program, the information submitted in reports to the Secretary pursuant to paragraph (1). (l)

Definitions

For purposes of this section, the following definitions shall apply: (1)

Affordable dwelling unit

The term affordable dwelling unit means a dwelling unit produced in whole or in part with amounts from a grant under this section that meets the requirements of subsection (c). (2)

Development costs

The term development costs means, with respect to housing to be produced with amounts from a grant under this section, costs incurred for any or all undertakings necessary for planning, land acquisition, demolition, construction, or equipment, including any necessary financing, and in otherwise carrying out the development of such housing, as determined by the Secretary. (3)

Low-income family

The term low-income family means a family whose income does not exceed 80 percent of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except that the Secretary may establish income ceilings higher or lower than 80 percent of the median for the area on the basis of the Secretary's findings that such variations are necessary because of prevailing levels of construction costs or unusually high or low family incomes. (4)

Moderate-income family

The term moderate-income family means a family who is not a low-income family and whose income does not exceed 125 percent of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except that the Secretary may establish income ceilings higher or lower than 125 percent of the median for the area on the basis of the Secretary's findings that such variations are necessary because of prevailing levels of construction costs or unusually high or low family incomes. (5)

Unit of general local government

The term unit of general local government has the meaning given such term in section 104 of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12704). (6)

Secretary

The term Secretary means the Secretary of Housing and Urban Development. (m)

Authorization of appropriations

There is authorized to be appropriated to the Secretary for grants under this section $125,000,000 for each of fiscal years 2007 through 2014. (n)

Regulations

The Secretary may issue any regulations necessary to carry out this section.