The Federal Low-Income Housing Tax Credit was created by the Tax-Reform Act of 1986 and extended by the revenue Reconciliation Acts of 1989 and 1992 in order to encourage the private sector to invest in the construction and rehabilitation of housing for low- and moderate-income families. The law gives states an annual tax credit allocation based on population and is administered by the Federal Internal Service (IRS) in accordance with Section 42 of the Internal Revenue Code.
The Low-Income Housing Tax Credit (LIHTC) program helps create affordable apartment communities with lower than market rents by offering tax incentives to the property owners (not the tenant renting the unit). Properties may contain market rate units that are not financially assisted, in addition to reduced rent LIHTC units under a tiered rent structure. A tiered rent structure means that it’s possible for the same unit to have different rent amounts for occupants with different incomes. LIHTC units may also have a rental subsidy program attached to them, such as the Project-Based Section 8 program.
Our LIHTC properties are attached to and ran in conjunction with our PBRA properties which is a bit complex with regulations spanning two types of affordable housing programs. It also requires that two sets of files, verifications and other documents be executed and maintained. Our LIHTC properties have tiered income limits where some units may be reserved for families earning 60% or less of the AMI and other units are set aside only for families earning 40% or even 30% of the AMI.