HR-8996-119
Referred to the House Committee on Ways and Means.
What it does
This bill would amend the Internal Revenue Code to allow property owners who build new residential rental housing (with at least 2 units) to immediately deduct up to $150,000 per dwelling unit from their taxable income in the year the property is placed in service, rather than spreading depreciation deductions over the standard 27.5-year schedule. Properties that also qualify as affordable housing under the existing Low-Income Housing Tax Credit (Section 42) rules would receive a higher deduction of $250,000 per unit. If a property stops being used as rental housing within 10 years (or 15 years for affordable housing), the owner must repay the accelerated tax benefit through a recapture provision.
Who benefits
Real estate developers and investors who build new rental housing, particularly those constructing multi-unit residential properties. Landlords who elect into the provision would receive an immediate reduction in taxable income. Affordable housing developers building Low-Income Housing Tax Credit (LIHTC) projects would receive an enhanced benefit. Prospective renters could indirectly benefit if increased construction expands housing supply and moderates rents. Construction workers and building supply companies may benefit from increased development activity. Lenders and investors in rental housing projects may see improved project economics.
Who is hurt
The federal government would forgo tax revenue in the near term, shifting the fiscal burden to other taxpayers or increasing the deficit. Existing rental property owners who built before the bill's effective date would not qualify, potentially creating a competitive disadvantage relative to new entrants. Homebuilders focused on for-sale housing could face a relative disadvantage if capital shifts toward rental construction. Tenants in markets where new supply does not materialize may see no rent relief. State and local governments that conform to federal tax law could see reduced state tax revenues.
Supporters argue
Supporters argue that the United States faces a shortage of millions of rental housing units, and that the current 27.5-year depreciation schedule fails to reflect the economic reality of construction costs, discouraging new development. They contend that front-loading depreciation deductions reduces the after-tax cost of building rental housing, making projects financially viable that would otherwise not pencil out — particularly in high-cost markets. The enhanced $250,000-per-unit deduction for affordable housing projects, they argue, directly targets the segment of the market with the greatest unmet need, complementing existing LIHTC incentives.
Opponents argue
Opponents argue that accelerated depreciation primarily benefits large real estate investors and developers who already have significant tax liability to offset, doing little for smaller landlords or nonprofit housing providers with limited taxable income. They contend that supply-side tax incentives have a mixed track record of translating into affordable rents, since developers may build in high-demand, high-rent markets rather than where affordability gaps are greatest. Critics also argue the revenue cost — a near-term reduction in federal tax receipts — represents a subsidy to a capital-intensive industry that could instead be directed toward direct rental assistance for low-income households.