Low-Income Housing Tax Credit

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The Low-Income Housing Tax Credit (LIHTC) is a federal program in the United States that awards tax credits to housing developers in exchange for agreeing to reserve a certain fraction of rent-restricted units for lower-income households.[1] The program was created under the Tax Reform Act of 1986 (TRA86) to incentivize the use of private equity in developing affordable housing.[2] Projects developed with LIHTC credits must maintain a certain percentage of affordable units for a set period of time, typically 30 years, though there is a "qualified contract" process that can allow property owners to opt out after 15 years.[3] The maximum rent that can be charged for designated affordable units is based on Area Median Income (AMI);[4] over 50% of residents in LIHTC properties are considered Extremely Low-Income (at or below 30% AMI).[5][6] Less than 10% of current credit expenditures are claimed by individual investors.[7]

From 1987 to 2021, at least 3.55 million housing units were placed through the LIHTC program.[8] As of 2012, the LIHTC program accounted for approximately 90% of all newly created affordable rental housing in the United States.[9]

In 2010, the President's Economic Recovery Advisory Board (PERAB) estimated that the LIHTC program would cost the federal government $61 billion (an average of about $6 billion per year) in lost tax revenue from participating corporations from 2008-2017, as well as noting that some experts believe that vouchers would more cost-effectively help low income households.[10] In 2023, the LIHTC program is estimated to cost the government an average of $13.5 billion annually.[1]

A 2018 report by the GAO covering the years 2011-2015 found that the LIHTC program financed about 50,000 low-income rental units annually, with median costs per unit for new construction ranging from $126,000 in Texas to $326,000 in California.[11]: 1  [12]: 1 

  1. ^ a b Keightly, Mark (2023). "An Introduction to the Low-Income Housing Tax Credit" (PDF). Congressional Research Service.
  2. ^ "Housing Credit". NCSHA. Retrieved 2023-11-09.
  3. ^ National Housing Law Project (2022). "LIHTC Preservation and Compliance".
  4. ^ "How the LIHTC program works". NHLP. 2017-09-07. Retrieved 2023-11-09.
  5. ^ "2019 LIHTC Tenant Tables" (PDF). HUD User.
  6. ^ "Title 24". Code of Federal Regulations.
  7. ^ Investable Tax Credits: The Case of the Low Income Housing Tax Credit, P. 23
  8. ^ "Low-Income Housing Tax Credit (LIHTC): Property Level Data | HUD USER". www.huduser.gov. Retrieved 2023-11-09.
  9. ^ "A Tax Credit Worth Preserving". The New York Times. 21 December 2012.
  10. ^ Cite error: The named reference PERAB_report was invoked but never defined (see the help page).
  11. ^ Cite error: The named reference GAO_2018_1 was invoked but never defined (see the help page).
  12. ^ Cite error: The named reference CL_1 was invoked but never defined (see the help page).