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Low Income Housing Tax Credits
Affordable Housing Programs
In operation since 1987, the Low Income Housing Tax Credit (LIHTC, Tax Credit or Section 42) program was created by the Tax Reform Act of 1986 as an alternate method of funding housing for low- and moderate-income households. Tax Credits must be used for new construction, rehabilitation, or acquisition and rehabilitation.
What Is Section 42 Housing?
Section 42 refers to that section of the IRS tax code, which provides tax credits to investors who build affordable housing. Investors receive a reduction in their tax liability in return for providing affordable housing to persons with fixed or lower incomes.
What Is The Use Of Tax Credits?
In return for this tax credit, investors provide important equity to insure that quality housing can be constructed with rents that remain affordable. This program has been very successful nationwide, and is responsible for 70% of new multifamily housing.
What Are The Requirements?
Projects must meet certain requirements that in qualify for Section 42 credits. A minimum number of units must be rent restricted and occupied by individuals whose income is a certain percentage of the area medium income (AMI) as determined by HUD.
Why Is Affordable Housing Important?
Affordable housing is critical to the economic development of our communities. Without affordable housing, the work force has no place in the local community to live, which in turn, makes it harder for local businesses to find employees and expand their businesses.
Who Lives In Affordable Housing?
The resident who lives in the Section 42 unit must be income eligible; however this program is not a subsidized rental program, contrary to public perception. Income limits increase by family size, i.e. the larger the family the higher the income must be.
How Do Communities View Affordable Housing?
Many times affordable housing has a negative perception in communities and erroneous perceptions lead to opposition to affordable housing. Today’s affordable communities rival that of many market rate communities, due to the availability of equity funds.


 
 
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