Low-Income Housing Tax Credit (LIHTC) Program

About the Program

The LIHTC Program is a tax incentive intended to increase the availability of low-income rental housing. The tax credit is a credit against regular tax liability for investments in affordable housing properties constructed, acquired and rehabilitated after 1986.

This indirect federal subsidy is used to finance construction and rehabilitation of rental housing for low-income individuals. It was created to incentivize private developers and investors to provide more low-income housing. Without this incentive, the supply of affordable rental housing would be limited because these projects would lack sufficient profit to warrant investment.

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Program Overview

The LIHTC is designed to subsidize either 30% or 70% of the costs in a low-income unit rental project. The 30% subsidy, commonly called the “automatic 4% tax credit,” is for new construction that includes additional subsidies or that can be used for the acquisition cost of existing buildings. The 70% subsidy, or “9% tax credit,” supports new construction that does not include any additional federal subsidies.

Qualifying LIHTC rental properties often have lower debt service payments and lower vacancy rates than traditional market-rate rental housing. LIHTC properties also may experience a faster lease-up and enhanced returns for investors because of the credit.

To qualify for tax credits, the proposed development must involve new construction or substantial rehab of existing units occupied by low-income individuals and families. Prospective applicants apply for housing tax credits by submitting an application to the LHC. Applications are received and evaluated under the Qualified Allocation Plan (QAP) at least once a year.

The QAP provides information on the calendar year program, including minimum project requirements, competitive criteria, and underwriting criteria. The amount of credits to which a project is eligible is based on the amount of qualified development costs incurred and the percentage of low-income units within the development. Each qualified tax credit development must include a minimum percentage of units to be set aside for eligible low-income tenants. These set-aside units must also be rent restricted.

Additional Information

The LIHTC is received each year for ten years, the period the taxpayer claims the credit on his/her federal income tax return. The owner must maintain the income and rent restrictions continuously for 15 years; known as the “compliance period."

Additionally, the owner must enter into an extended use period of an additional 15 years by filing a regulatory agreement on the project with the clerk of court in the parish where the property is located.

The LHC Compliance Division monitors the property throughout the compliance and extended use periods to ensure that the property remains safe, decent and affordable to low-income families.