WHAT IS THE LOW INCOME HOUSING TAX CREDIT?
The Low Income Housing Tax Credit Program (LIHTC) was created by the Tax Reform Act of 1986 to help meet the need for low-income rental housing, and to replace the Section 8 New Construction/Sub Rehab program terminated in the early 1980s. To be eligible for low-income housing tax credits, a housing developer must set aside a minimum percentage of units for low-income residents. This percentage must be maintained throughout the extended use period, usually at least 30 years. The minimum set-aside is either of the following: • 20% of the units rented to tenants earning 50% or less of the area median income (adjusted for family size) established by HUD • 40% of the units rented to tenants earning 60% or less of the area median income (adjusted for family size) established by HUD If the standards are met and approval is granted in advance of the project, investors receive a ten-year stream of federal tax credits. The value of these credits is usually converted into equity in the project,
