H.R. 537: Incentivizing New Conversions to Residential Entities to Accelerate Supply and Expand Housing Affordability Act

This bill, titled the Incentivizing New Conversions to Residential Entities to Accelerate Supply and Expand Housing Affordability Act (INCREASE Housing Affordability Act), aims to encourage the conversion of commercial buildings into residential units to address housing availability and affordability issues. Below is an overview of the main provisions of the bill:

Tax Credits for Conversion

• The bill introduces a tax credit for the conversion of commercial buildings into residential properties, known as the commercial-to-residential credit.
• This tax credit is set at 15% of the qualified conversion expenses incurred in re-purposing a building into residential units.
• The maximum amount of the credit is capped at $200,000 per new residential housing unit and $10 million per converted building.

Increased Credits for Affordable Housing

• If a converted building has at least 25% of its units designated as rent-restricted and occupied by individuals within certain income limits, the tax credit can be further enhanced:
• 10% increase if units are for individuals earning up to 100% of the area median income.
• 15% increase if for those earning up to 80% of the area median income.
• 20% increase for units rented by those earning up to 60% of the area median income.

Wage Requirements for Labor

• The bill stipulates a bonus credit of 15% for conversions that comply with prevailing wage requirements during the construction process.
• This means that laborers must be paid at least the local prevailing wage rates for similar construction work.

Definition and Criteria for Qualified Conversions

• A "qualified converted building" must have been nonresidential real property available for lease to office tenants prior to conversion.
• The building must be at least 15 years old and designated for substantial conversion.
• Qualified conversion expenditures must meet specific criteria outlined in the bill, which includes restrictions on types of expenditures that can be claimed for the credit.

Advisory Board Establishment

• The bill requires the establishment of an advisory board within the Department of Housing and Urban Development (HUD) to assist and provide guidance to state and local housing agencies.
• The board's responsibilities include identifying suitable buildings for conversion, performing feasibility analyses, expediting regulatory approvals, and reforming zoning laws to facilitate conversions.
• It is authorized to receive $5 million annually from fiscal years 2025 to 2029 for operations.

Implementation Timeline

• The provisions for tax credits and the advisory board are set to take effect for qualified expenditures incurred after the bill’s enactment.

Relevant Companies

• CBRE Group, Inc. (CBRE) - A commercial real estate services company that may be involved in the consultation and management of conversions.
• American Tower Corporation (AMT) - While primarily in telecommunications infrastructure, the company’s involvement in real estate could intersect with commercial-to-residential conversions.
• Prologis, Inc. (PLD) - A logistics real estate company that could benefit from possible conversions of warehouse spaces into residential units.