How is the Credit used to produce low-income housing?
Investors contribute equity to a Project in return for Credit, commonly through a syndication process. The investors use the Credit to reduce their federal tax liabilities and the Developer uses the investors equity to help rehabilitate or construct the Project. Since the Developer is able to complete the Project with less debt-service financing, the Projects rents can be reduced to serve households with low incomes. Ownership is generally structured as a Limited Partnership between the Developer and the investors who then share in the “benefits and burdens” of ownership. Typically, the Developer is the sole General Partner and the investors are Limited Partners. The Developer/General Partner manages and controls the development and operation of the Project. In order to get maximum benefit from the Credit and depreciation deductions, the investors/Limited Partners usually own at least 99% of the ownership interests and retain at least 99% of the Credits and depreciation losses while th
