Rental Housing Tax Credit Program
One of the federal government's primary vehicle for producing affordable rental housing
is through the Low-Income Housing Tax Credit program (LIHTC) also referred to as "Section 42 Housing"
or "Rental Housing Tax Credit" program. The program was enacted by Congress in 1986 to encourage
new construction and rehabilitation of existing rental housing for low-income households and
for the person whose income is at or below specified income levels. Congress also found this
as an opportunity for the private sector to invest in affordable rental housing as well.
Each year, the federal housing tax credits are awarded to developers of qualified projects.
Developers then sell these credits to investors to raise capital for their projects, which
reduces the amount of borrowed debt. In return, the developer agrees to offer lower, more
affordable rents.
Property Owners of LIHTC developments are required annually to certify their compliance
to the program's guidelines. Non-compliance could result in loss of tax credit funding.
The LIHTC program has been a benefit to property owners, tenants, and the private sector
and has resulted in over 2.4 million apartment units built to serve the housing needs of
lower income families throughout the United States.
In addition to creating needed affordable housing, LIHTCs provide significant economic
benefits for the local community. According to the National Association of Home Builders'
March 2010 report "The Local Economic Impact of Typical Housing Tax Credit Developments,"
the estimated one-year local impacts of building 100 apartments in a typical family tax
credit development include:
- $7.9 million in local income
- $827,000 in taxes and other revenue for local governments, and
- 122 local jobs.
The additional, annually recurring impacts of building 100 apartments in a typical family
tax credit development include:
- $2.4 million in local income
- $441,000 in taxes and other revenue for local governments, and
- 30 local jobs.
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