HR-9870-119
Referred to the House Committee on Ways and Means.
Sponsored by Scott Peters (D-CA)
What it does
This bill would let property owners defer paying capital gains tax when they sell real estate to a qualified affordable housing operator (such as a public housing agency, tribal housing entity, or nonprofit housing developer), treating the sale like an "involuntary conversion" under existing tax law. To qualify, the property must be legally restricted to affordable rental housing or homeless shelter use for 30 years, the sale price cannot exceed an independent appraisal, and the seller must notify the Treasury Department within 90 days.
Who benefits
Property owners who sell land or buildings to affordable housing developers, who would defer capital gains tax liability. Affordable housing developers and operators (public housing agencies, tribal housing entities, community housing development organizations, and qualified nonprofits) who may gain easier access to land at lower effective seller costs. Low-income renters and homeless individuals who could eventually occupy the resulting housing units, and local governments seeking to expand affordable housing stock.
Who is hurt
The federal government would collect less capital gains tax revenue from these transactions, at least temporarily, shifting some tax burden or reducing revenue available for other purposes. Property owners who sell to buyers other than qualified housing operators would not benefit and could see relatively less incentive to sell to market-rate buyers. Market-rate developers and buyers competing for the same parcels may face less favorable terms since sellers have new tax incentives to favor housing-operator buyers. The IRS would bear added administrative and audit burdens to track 30-year compliance.
Supporters argue
Supporters argue that a major barrier to building affordable housing is the difficulty of acquiring land and buildings, since owners often avoid selling because of capital gains tax liability, and that this bill removes that disincentive by deferring taxes when the property goes toward affordable housing. They contend the 30-year deed restriction and appraisal-cap requirement ensure the tax benefit is tied to genuine, lasting affordability rather than short-term flips, addressing a documented shortage of affordable units nationwide.
Opponents argue
Opponents argue that expanding nonrecognition-of-gain treatment reduces federal tax revenue with uncertain returns, since deferred gains may never be fully recaptured if properties are repeatedly resold to other qualified operators. They contend the 30-year enforcement mechanism relies on Treasury audits that may be underfunded or inconsistently applied, and that the incentive primarily benefits sophisticated sellers and housing organizations able to navigate the appraisal and notification requirements rather than directly increasing housing supply.