Federal Reserve Bank of San Francisco

Community Development

Using New Markets Tax Credits to Mitigate the Impact of Foreclosures on Communities

Author(s):

April 2009

Community Development Investment Review

Across the country, committees have been established to come up with ways to mitigate the impact of foreclosures on lower-income communities. A few are exploring the feasibility of having community-based organizations use the New Markets Tax Credit (NMTC) Program to facilitate the purchase of foreclosed residential properties for rehabilitation and resale to low- and moderate-income families. In theory, these organizations could use the tax credits to help recover their costs for purchasing, fixing up, and selling homes at a price that is affordable to lower-income buyers. Moreover, the tax credits could help community-based organizations attract appropriate amounts of capital to conduct transactions at a scale that would stem disinvestment in troubled neighborhoods.

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