The Neighborhood Homes Investment Act introduces a new federal tax credit designed to stimulate the development and rehabilitation of affordable housing in economically distressed areas. This initiative seeks to address the national housing shortage, particularly impacting low-income communities, by closing the financial gap between construction costs and the market value of homes. The credit aims to foster homeownership, which is recognized as a key driver of household wealth and neighborhood stability. The new tax credit, known as the Neighborhood Homes Credit , is calculated based on the lesser of three amounts: the difference between reasonable development costs and the sale price (potentially up to 120% of this difference for feasibility), 40% of eligible development costs, or 32% of the national median sale price for new homes. To qualify, residences must be part of a certified project, located in a designated "qualified census tract," and sold at an "affordable sale" price to a "qualified homeowner." Qualified homeowners are individuals whose family income does not exceed 140% of the area median income and who will use the home as their principal residence. A "qualified residence" can be a house with up to four units, a condominium, or a cooperative housing unit. "Qualified census tracts" are defined by specific criteria related to median family income, poverty rates, and home values, or can include disaster areas or areas identified by state agencies as having a shortage of affordable owner-occupied homes. The bill also includes provisions for owner-occupied rehabilitations, offering an alternative credit calculation for existing homeowners with incomes up to the area median, to help them improve their homes. The credit is administered by state " neighborhood homes credit agencies ," which are responsible for allocating credit amounts to qualified projects based on a comprehensive "qualified allocation plan." These plans must prioritize projects that address housing needs, contribute to neighborhood revitalization, and demonstrate sponsor capability. Agencies are also tasked with promulgating standards for development costs, construction quality, and protecting homeowners, as well as providing annual reports to the Secretary of the Treasury. To ensure the long-term affordability and stability of these homes, the bill includes a repayment mechanism: if a qualified residence is sold within five years of its affordable sale, the seller must repay a portion of the gain to the state agency, with a lien placed on the property. The agency can waive this repayment in cases of hardship. Additionally, the bill makes the credit part of the general business credit, allows it against the alternative minimum tax, and excludes state energy subsidies for qualified residences from gross income. It also denies deductions for rental expenses if a qualified residence is converted to rental housing within five years.