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HB 1135

Income tax, state; tax credit for affordable housing projects.

2026 Regular Session Introduced by Jay Leftwich

HB 1135 creates a state income tax credit for affordable housing project investments to incentivize private development of affordable units in Virginia.

Assigned HFIN sub: Subcommittee #1
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Bill Summary · HB 1135

Legislative bill overview

HB 1135 establishes a state income tax credit for developers and investors who contribute to affordable housing projects in Virginia. The credit would reduce state tax liability for entities that finance, build, or rehabilitate housing designated as affordable. This mechanism aims to incentivize private investment in affordable housing development without direct state expenditures.

Why is this important

Virginia faces a significant affordable housing shortage, with many workers priced out of homeownership and rental markets in growing regions. Tax credits are a proven policy tool used federally and in other states to leverage private capital for affordable housing without requiring direct budget appropriations. However, the actual affordability impact depends heavily on credit design—specifically eligibility requirements, credit amounts, and how "affordable" is defined.

Potential points of contention

  • Cost to state revenue: Even if structured as a tax credit rather than spending, this represents foregone state income tax revenue that must be offset elsewhere or reduces available funds for other programs
  • Effectiveness and targeting: Questions about whether tax credits efficiently reach populations most in need, or whether they primarily benefit larger developers and investors already involved in housing projects
  • Definition and enforcement of "affordable": How affordable units are defined (income levels served, duration of affordability requirements, rent/purchase price caps) will significantly affect actual benefit to low-income Virginians
  • Geographic distribution: Whether credits flow equally to rural and urban areas or concentrate in high-demand regions where housing costs are already highest

Compiled from official sources — confirm details with the bill’s official record.

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