LIHTC

The Low-Income Housing Tax Credit, or LIHTC, is a federal program administered by the U.S. Department of the Treasury and the Internal Revenue Service (IRS). It is the primary federal tool for encouraging the development and rehabilitation of affordable rental housing for low- and moderate-income households. The program works by providing tax credits to investors who finance the construction or rehabilitation of these housing projects.

Developers receive LIHTC allocations from state housing finance agencies. These credits can then be sold to investors, who in turn receive a reduction in their federal tax liability over a ten-year period. This investment mechanism makes it more financially feasible for developers to build or renovate properties and then rent them out at below-market rates. The affordability requirements for the tenants are typically tied to a percentage of the area median income (AMI), with most units reserved for households earning 60% AMI or less.

LIHTC projects are subject to various compliance and monitoring requirements to ensure that the affordable housing remains available for the designated income levels for a minimum period, usually 30 years. The program has been credited with creating or preserving millions of affordable housing units across the United States since its inception in 1986. It is a critical component of the nation's affordable housing strategy, addressing shortages and providing stable housing options for a significant portion of the population.