Since Congress passed the New Markets Tax Credit (NMTC) bill in 2000 to incentivize sustained investments in low-income communities, the program has made a significant and transformative impact in neighborhoods across the United States.

In partnership with the U.S. Department of Treasury’s Community Development Financial Institutions (CDFI) Fund, which serves to empower economically disadvantaged communities, the NMTC program has awarded $76 billion in funding.

However, the tax credit remains impermanent—even nearly 25 years after it was first created. Beyond advocating to make the NMTC program a permanent staple of America’s tax law, there are a number of critical considerations to strengthen the NMTC program to better support the development of for-sale housing.

Why Focus on Affordable For-Sale Housing?

Homeownership remains a critical and transformative driver for economic and social development. Owning a home provides neighborhood stability, fosters community connections and investment, and fuels intergenerational wealth-building for low- and moderate-income homeowners—particularly Black and Brown families facing a wide wealth gap compared to white families.

From a tax credit perspective, no federal funding opportunities exist solely to support for-sale housing.

While the Low-Income Housing Tax Credit (LIHTC) Program is widely considered one of the most important resources for creating affordable housing in the United States, this credit only subsidizes the acquisition, construction, and rehabilitation of affordable rental housing for low- and moderate-income tenants.

Rental housing remains an important component of ending the housing crisis, but it doesn’t solve the intergenerational legacy of housing discrimination nor provide families with the opportunity to build equity and wealth. This underscores the critical need for a tax credit that supports affordable for-sale housing.

Legislative and Administrative Changes for the NMTC Application  

What can policymakers, experts, and housing advocates do to draw new attention to the power of the NMTC model for affordable for-sale housing? Both administrative and legislative changes are needed to advance the model.

Administrative Changes 

Application Tweaks 

The current NMTC application is designed to incentivize community revitalization and job creation. However, the application has the potential to better incentivize applicants to commit a portion of their allocation to affordable homeownership projects with a few minor revisions.

This includes recognizing affordable for-sale housing as a stand-alone or housing in high affordable housing need areas as an “innovative use” on the application and providing equal space in the application to discuss its key benefits, similar to the total space allotted for job creation.

Legislative Changes 

Higher Distress Criteria 

From a legislative perspective, Congress could modify the current proposed NMTC legislation to include the development of for-sale housing projects in areas of high affordable housing need as a qualified “Higher Distress Criteria.”

Carveout for Affordable Housing 

The current NMTC application includes a provision to ensure that a certain percentage of NMTC funding is allocated to projects in non-metropolitan areas. These areas are typically defined as locations outside of Metropolitan Statistical Areas (MSAs) and are often characterized by lower population density and limited access to economic development resources.

Similar to this non-metro carveout, creating some type of a carveout for affordable for-sale housing would ensure that a portion of NMTC funds are dedicated to these transformative projects.

Looking to the Future 

Make the New Markets Tax Credit Program Permanent 

Since the NMTC Program was enacted in 2000, the program has seen a record of success and wide support. However, the credit has relied on periodic extensions from the government. Making the NMTC Program a permanent part of the national tax code would encourage greater investment and interest in the potential of the program, leading to more widespread adoption.

Biden’s 2025 budget proposal included provisions to make the NMTC program permanent with a $5 billion annual allocation—a positive and transformative step forward.

At Smith NMTC Associates, we’ve pioneered a New Markets Tax Credits (NMTC) funding model to bring quality affordable homeownership to many underserved—and predominantly Black and Brown—communities in the U.S.

For nonprofit developers, investors, and lenders, we see a significant opportunity to leverage the NMTC program as a tool to drive more housing opportunities for underserved homeowners. To learn more about how the NMTC program can serve your community and your constituents, reach out to us.