Why Use NMTCs for Affordable For-Sale Homeownership

In today’s highly competitive housing crisis, sustainable homeownership has become entirely out of reach for the majority of low- and moderate-income families. With news reports highlighting all-cash offers above asking prices and a national shortage of housing stock, many families today are struggling to navigate the housing market. 

Since March 2021, home prices have risen more than 20 percent, marking the biggest increase in over 35 years. This, coupled with historically high interest rates and a lack of housing inventory, is leaving most Americans without a sustainable option forward. 

To effectively combat America’s housing crisis, we need to rely on every feasible option—including the use of the New Markets Tax Credit (NMTC) program. Although developers today are incentivized to make affordable rental housing a possibility through Low-Income Housing Tax Credits (LIHTC), we believe that affordable for-sale housing remains one of the most important and underutilized pathways to addressing the housing crisis and providing more families, especially families of color, with financial well-being. 

Understanding the New Markets Tax Credit Program 

In 2000, the New Markets Tax Credit program was launched with the goal of helping to lift low-income communities and low-income persons out of poverty. Under the direction of the U.S. Department of Treasury’s Community Development Financial Institutions Fund, NMTCs incentivize sustained investment in low-income communities funding projects that bring jobs, affordable homeownership, healthy food, medical care and community, and commercial goods and services to those communities and their residents. 

Since the launch of the program, NMTCs have proven to be a transformative capital resource for many communities across the United States. 

As of 2019, the NMTC program has funded total project costs of nearly $102 billion with $56 billion of NMTC investments. Historically, these awards have generated $8 of private investment for every $1 invested by the federal government. Although NMTCs are a proven and powerful tool to scale for-sale housing development, the credits are underutilized for affordable homeownership development. Of the $56 billion deployed thus far, less than 2% has been used for affordable homeownership projects. 

Using NMTCs for Affordable For-Sale Homeownership 

In 2008, Smith NMTC Associates pioneered the very first use of the NMTC program to fund affordable homeownership through a CDE it formed in partnership with Habitat for Humanity International. 

Since that successful application and inaugural project, Smith NMTC has expanded its impact by supporting other nonprofit developers, CDEs, and mission-driven collaborators. Over the past 14 years, we’ve secured and deployed over $500 million in NMTC funding for affordable for-sale housing projects throughout the U.S. All of this underscores the true possibility of successfully expanding the use of the NMTC program to help address the national affordable for-sale housing shortage. 

Unlike renting an affordable house or apartment, owning a home provides families, especially low-income and families of color, with the opportunity to accumulate wealth, to use the equity to help improve the financial, physical and mental well-being of all family members, and to lay the foundation of continued financial stability for generations to come. 

Our Impact 

We offer transparency with our proprietary models because we believe so deeply in homeownership—and its ability to enact sustainable change in the lives of low-income families across the country. You can access all our available resources, including our three models, for reference.

We’re also committed to serving as a resource and a collaborative partner for anyone interested in utilizing the NMTC program for affordable for-sale homeownership. Reach out to us at info@smithnmtc.com to schedule a call or learn more.