Skip to Content

Low-Income Housing Tax Credit (LIHTC)

Low-Income Housing Tax Credit (LIHTC)

The Low-Income Housing Tax Credit (LIHTC) is a subsidized housing program in which the federal government gives tax credits to state and territorial governments for low-income housing development. Applicants must qualify by meeting the Area Media Income (AMI) limits; rent is set at 30% of the income associated with the dwelling and also by the family size.

Advertisements

What is the Low Income Housing Tax Credit (LIHTC)?

The LIHTC is the government’s largest initiative to create low-income housing. It was created by the Tax Reform Act of 1986 and has provided $8 billion in tax credits to developers and investors. The act enables state and local LIHTC agencies to allocate tax credits for obtaining new housing whether it be through the purchase of new or existing housing, new construction, and/or rehabilitation. 

The LIHTC requires that a certain amount of housing be available to low-income individuals and families. Specifically, the housing must include 20% of tenants with income that is 50% below the AMI, 40% of tenants with 60% of their income below the AMI, and no more than 60% of tenants with incomes greater than 80% of the AMI.

Advertisements

Why is LIHTC important?

There is an ongoing housing crisis for affordable housing in the U.S. particularly low-income housing. There are more than 8 million low-income housing units/homes attributed to LIHTC, and the median income is less than $18,200. The pandemic has further increased the need for low-income housing.

The LIHTC does not have a far enough reach so states supplement the gap with their own low-income housing programs. However, not all states have a program, and in some, it’s been a struggle to establish one. Additionally, the rent restrictions under the Tax Reform Act are meant to last 30 years, but after the government reclaims the tax credits within the first 15 years, landlords are eligible to request to exit the program.

Advertisements

What do you need to know about the LIHTC?

While the LIHTC is not a program in which you can apply for low-income housing directly, it is important to know that it is the source of low-income housing. If you feel strongly about voicing your support for expanding this program and others like it, you can find and reach out to your state representatives and senators at house.gov

The LIHTC is managed by the Department of Housing and Urban Development (HUD) which also lists state offices where you can apply for low-income housing. Another good resource for low-income housing programs is usa.gov. The Low Income Relief team has also written several posts about low-income housing topics.

LIHTC and Low Income Relief

The Low-Income Relief team covers this topic frequently. Some posts written about this topic include: 

FAQs about LIHTC

We get a lot of questions about low-income housing. Here are some of the questions we are asked most often.

What qualifies as low income?

HUD sets the income limits that determine eligibility for subsidized low-income housing. The limits depend on where you live and your area’s AMI. The AMI is determined for metropolitan areas, parts of metropolitan areas, and by county (those outside metropolitan areas). Candidates applying for housing assistance programs (eg, Section 8 Housing programs) must have an income equal to or less than the AMI benchmark. Income limits range from 50%-80% of a region’s AMI.

Annual gross income is just a part of the application process. Other factors include whether there is an elderly individual applying if there is someone with a disability, the applicant’s citizenship or immigration status, and references. 

How can I apply for low-income housing?

You can get more information about applying for low-income housing at the HUD website here. If you don’t see an office close to you, consider contacting one of the other state offices that can help you to locate one close to you.

Advertisements

What is Section 8 housing?

Outside of low-income housing developments created by the LIHTC, many landlords participate in the government’s subsidized housing assistance program called the Housing Choice Voucher Program Section 8. You can get more specific information about housing in your area by contacting your closest HUD office here.

Related to LIHTC

Advertisements