H.R. 9573: Housing Opportunities and Preservation Enhancement Act of 2026

This bill would create a new set of federal tax rules for a specific type of rental housing, aimed at encouraging the rehabilitation and long-term operation of certain affordable residential rental properties.

What properties would qualify

The bill defines a “qualified property” as a residential rental building that meets several conditions, including:

• It is a residential rental property.
• If it is a low-income housing tax credit property, it must be outside its compliance period.
• It must be owned by a partnership whose managing member or general partner is a tax-exempt organization, a state or local government, a tribal housing agency, or a public housing authority.
• At least 70% of the units must be rent-restricted and occupied by households earning 80% or less of area median income.
• The building must already be subject to certain long-term affordability restrictions.
• It must undergo substantial rehabilitation within a 24-month period, with costs equal to at least 20% of the building’s adjusted basis or $20,000 per unit, whichever is greater.
• The building must have been placed in service more than 15 years before the rehabilitation begins.

The bill would also require an independent attorney or CPA to certify that the rehabilitation spending requirement was met.

Tax incentives and rules the bill would create

For qualifying properties, the bill would offer several tax benefits and rule changes:

• Special tax treatment for rehabilitation and ownership: It would create a new subchapter in the tax code for these properties.
• Right of first refusal protection: A government agency or certain nonprofit organizations could have a right of first refusal or purchase option to buy the property after 10 years without causing the taxpayer to lose the federal tax benefit, as long as the purchase price is at least a specified minimum.
• Not treated as passive activity: Rental activity involving qualified property would not count as a passive activity for tax purposes.
• Exception to profit motive rules: The usual tax rule requiring an activity to be engaged in for profit would not apply.
• Special financing treatment: Certain loans from tax-exempt organizations would be treated as qualified nonrecourse financing for partnership tax purposes.
• Gain or loss after 10 years: If the property is sold or exchanged after being held for at least 10 years, its basis would be treated as equal to fair market value on the sale date for purposes of calculating gain or loss.
• Faster depreciation: The recovery period for the property, including property intended to become qualified property within 24 months, would be 15 years.
• No basis reduction from certain credits/deductions: Some existing tax rules that reduce a property’s basis because of energy-efficiency credits, deductions, or investment credits would not apply to qualified property.
• Capital grants: Certain capital grant amounts received by eligible entities for property intended to become qualified property would not count as taxable income, and the basis of property acquired with that money would not be reduced by the grant amount.

Inflation adjustment

The $20,000-per-unit rehabilitation threshold would be adjusted for inflation in years after 2026.

Effective date

The new rules would apply to taxable years beginning after the date the bill is enacted.

Relevant Companies

None found