[Congressional Record Volume 148, Number 136 (Wednesday, October 16, 2002)]
[Senate]
[Pages S10586-S10587]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Santorum, and Mr. Sarbanes):
  S. 3126. A bill to amend the Internal Revenue Code of 1986 to allow 
an income tax credit for the provision of homeownership and community 
development, and for other purposes, to the Committee on Finance.
  Mr. KERRY. Mr. President, owning your own home is the foundation of 
the American dream. It encourages personal responsibility, provides 
economic security and gives families a greater stake in the development 
of their communities. Families who own their home are more civic-minded 
and more willing to help develop the communities where they live. 
Communities where homeownership rates are highest have lower crime 
rates, better schools and provide a better quality of life for families 
to raise their children. However, too many working families and 
minorities have not been able to share in the dream of homeownership 
due to the cost or lack of available housing.
  That is why I am introducing the Community Development Tax Credit 
Act, along with Senators Rick Santorum and Paul Sarbanes, which will 
create a new homeownership tax credit program, based on the Low Income 
Housing Tax Credit program, to encourage the construction and 
substantial rehabilitation of homes for low and moderate-income 
families in economically distressed areas. I believe this legislation 
will increase the supply of affordable homes for sale in inner-cities, 
rural areas and low and moderate-income neighborhoods across the United 
States. The tax credit will bridge the gap that exists between the cost 
of developing affordable housing and the price at which these homes can 
be sold in many low-income neighborhoods by providing investors with a 
tax credit of up to 50 percent of the cost of home construction or 
rehabilitation.
  Over the past decade, we have made substantial progress in increasing 
the homeownership rate in the United States. In 2000, the U.S. 
homeownership rate reached a record high of 67.1

[[Page S10587]]

percent with some 71 million U.S. Households owning their own home. 
However, too many working families in low- and moderate-income 
neighborhoods and minorities across our Nation have not been able to 
share in this piece of the American Dream due to the high cost or lack 
of available housing.
  According to Census data for the second quarter of 2002, non-Hispanic 
whites have a 74.3 percent homeownership rate while minority groups 
have just a 53.7 percent homeownership rate. African-Americans have 
only a 48 percent homeownership rate and Hispanics have a mere 47.6 
percent homeownership rate in the same study. These numbers are 
unacceptable.
  Many middle-income working families increasingly struggle to either 
find or afford a median-priced home in our Nation's cities. Over the 
past two generations, many families have moved out of cities and into 
the suburbs, which has had a negative effect on the development of 
housing in the inner-city. In 1999, the homeownership rate in the 
central-city areas was 50.4 percent, this is 23.2 percent lower than 
the suburban homeownership rate of 73.6 percent. Today, developers are 
unlikely to invest in any new housing development in inner-cities and 
rural areas that may not be sold for the cost of construction. This is 
especially true in low-income areas. There is a lack of affordable 
single-family housing in areas where a majority of residents are 
minority families. Properties will sit vacant and neighborhoods will 
remain undeveloped unless the gap between development costs and market 
prices can be filled.
  Working families in this country are increasingly finding themselves 
unable to afford housing. A person trying to live in Boston would have 
to make more than $35,000, annually, just to rent a two-bedroom 
apartment. This means teachers, janitors, social workers, police 
officers and other full-time workers are having trouble affording even 
a modest two-bedroom apartment when they should have a chance to buy a 
home.
  The story of Benjamin and Rita Okafor show how working families in 
Massachusetts have great difficulty obtaining a decent home of their 
own. For many years, the Okafor's and their two young children were 
forced to live in a one-bedroom apartment. Benjamin Okafor, who worked 
full time as a cab driver in Boston, spent days and months looking for 
a bigger apartment for his family. However, the lack of affordable 
housing in the Boston area made it impossible for him to find 
appropriate housing for his family. When his wife Rita became pregnant 
with their third child, the Okafor's knew something had to change in 
their living situation. Luckily, Ben was accepted into the Habitat for 
Humanity program and worked for 300 sweat equity hours constructing a 
house. In August 2000, the Okafor family moved into a new home of their 
own in Dorchester. Ben says that this new home gives them the hope and 
stability they need. There are still too many working families living 
in substandard housing and many more families that desperately need 
assistance from Habitat for Humanity or from the Federal government to 
become a homeowner.
  Today, our Nation is facing an affordable rental housing crisis. 
Thousands of low-income families with children, the disabled, and the 
elderly are finding it difficult to obtain or afford privately owned 
affordable rental housing units. Recent changes in the housing market 
have limited the availability of affordable housing across the country, 
while the growth in our economy in the last decade has dramatically 
increased the cost of the housing that remains. Moving thousands of 
working families from apartments to homes each year will help ease our 
rental housing crisis and help many families now living in substandard 
housing increase their quality of life.
  By facing the mounting challenge of affordable housing we can 
dramatically assist in the economic development low- and moderate-
income communities across our country. The production of new homes will 
create millions of jobs in the inner city and rural areas where 
unemployment has been for too long fact of life. The production of 
housing has always been considered a driver of economic growth in our 
economy. New housing production can turn many low income communities 
around and help end the spiral of unemployment and crime which plague 
too many of our inner cities today.
  For these reasons, we need a new tax incentive for developers to 
build affordable homes in distressed areas to allow working families to 
buy their first home at a reasonable rate.
  The Community Development Tax Credit Act, which I am introducing 
today, bridges the gap between development costs and market value to 
enable the development of new or refurbished homes in these areas to 
blossom. The tax credit would be available to developers or investors 
that build or substantially rehabilitate homes for sale to low- or 
moderate-income buyers in low-income areas. The credit would generate 
equity investment sufficient to cover the gap between the cost of 
development and the price at which the home can be sold to an eligible 
buyer
  The tax credit volume would be limited to $1.75 per capita for each 
State and allocated by the States themselves. Credits would be claimed 
over five years, starting when homes are sold. This legislation will 
result in approximately 50,000 homes built or refurbished annually, 
assuming about $40,000 per home.
  The maximum tax credit equals 50 percent of the cost of construction, 
substantial rehabilitation, and building acquisition. The eligible cost 
may not exceed the Federal Housing Administration single-family 
mortgage limits. The minimum rehabilitation cost is $25,000. Eligible 
building acquisition costs are limited to one-half of rehabilitation 
costs. States will allocate only the level of tax credits necessary for 
financial feasibility. Ten percent of the available credit will be set 
aside for nonprofit organizations.
  The eligible areas for the tax credit are defined as Census Tracts 
with median income below 80 percent of the area or state median. Rural 
areas that are currently eligible for USDA housing programs will be 
eligible for the tax credit. Indian tribal lands will be eligible for 
the tax credit. State-identified areas of chronic economic distress 
will be eligible for the tax credit, subject to disapproval by the 
Department of Housing and Urban Development
  Those eligible to buy homes built or refurbished using the tax credit 
include: individuals with incomes up to 80 percent of the area or state 
median and up to 100 percent of area median income in low-income/high-
poverty Census Tracts.
  Individual states will write plans for allocating the tax credits 
using the following selection criteria: contribution of the development 
to community stability and revitalization; community and local 
government support; need for homeownership development in the area; 
sponsor capability; and the long-term sustainability of the project as 
owner-occupied residences. Individual developers along with investors 
then can apply to the State to be awarded a tax credit for developing a 
property in a low- or moderate-income area. If chosen by the State, 
investors can start to claim the tax credits as the homes are sold to 
eligible buyers. They can continue to claim the tax credit over five 
years. Investors are not subject to recapture. If the home owner sold 
the residence within five years, a scale would determine the percentage 
of the gain would be recaptured by the Federal Government. In the first 
two years, 100 percent of the gain and 80, 70 and 60 percent in the 
third, fourth, and fifth years, respectively would be recaptured.
  This legislation is supported by the U.S. Conference of Mayors, 
Fannie Mae, Freddie Mac, the Enterprise Foundation, Local Initiatives 
Support Coalition, Mortgage Bankers Association of America, National 
Association of Home Builders, National Low Income Housing Coalition, 
National Association of Local Housing Finance Agencies, National 
Association of Realtors, National Council of La Raza, National Hispanic 
Housing Conference, Habitat for Humanity International and others.

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