How Investors Can Be Part of the Affordable Housing Solution
The Problematic State of Affordable Housing in the U.S.
All over the U.S., Americans classified as low-income are having difficulty finding affordable housing. Across the entire country, millions of people put nearly three-quarters of their monthly take-home pay towards rent. As rental rates continue to increase, the near future does not look promising for Americans stuck in these circumstances.
Many have looked to the local, state, and federal governments for a solution, although it isn’t clear what the answer is. The crisis of affordable housing persists despite the homebuyer assistance programs, tax credits, initiatives, and vouchers that are in place, and which look different from state to state.
One thing is clear: investors can make a difference in the midst of the crisis. The Tax Cut and Jobs Act of 2017, established by Congress, gives home buyers an opportunity to invest in Opportunity Zones and bring relief to low-income Americans.
Opportunity Zones Give Home Buyers a Chance to Help
What is an Opportunity Zone?
Opportunity Zones are clearly demarcated areas containing a low-income population. Each state designates its own Opportunity Zones, which may constitute up to 25% of its low-income areas.
Investors who buy property inside these areas enjoy certain tax benefits, namely, capital gains tax deferment or dismissal, and the allowance to reinvest capital gains income. These advantages are designed to incentivize real estate investors to buy homes in Opportunity Zones.
The goal is economic development in the long-term. Investor funds pouring into low-income communities will ideally create more employment opportunities, business growth, and even more housing construction.