Low Income Housing Tax Credits: A Summary of Leveraging LIHTC in Your Affordable Housing Project

Developing affordable housing is essential for community growth, but financing can often be a challenge. The Low-Income Housing Tax Credit (LIHTC) program offers a significant opportunity to offset costs and ensure the financial viability of your project. By understanding the application process and strategically using LIHTC, developers can make affordable housing more attainable and sustainable.

What is LIHTC?

LIHTC is a federal U.S. program that provides tax incentives to developers who build or rehabilitate affordable rental housing. The credits come in two forms:

• 9% credits for new construction or substantial rehabilitation.

• 4% credits for new construction or acquisition and rehabilitation of existing properties.

Developers sell these credits to private investors, which helps raise capital for the project and reduces reliance on debt financing.

LIHTC Basics for Your Project

1. Understand the Eligibility Requirements
   To qualify for LIHTC, your project must set aside a portion of units for low-income tenants, with income and rent restrictions. The property must also comply with these standards for at least 30 years.

2. Apply for LIHTC Allocation
   The allocation process is managed by state housing agencies. You’ll need to submit a detailed proposal showing the project’s design, budget, and financial feasibility. State agencies use a scoring system to rank applications based on factors like affordability and community impact.

3. Partner with Investors
   Once you’ve secured your allocation, you’ll need to partner with investors to monetize the credits. This often involves working with syndicators, who pool investments to purchase LIHTC credits and distribute the proceeds. A strong investor partnership is crucial for maximizing the value of the credits.

4. Maximize the Value of LIHTC
   To get the most out of LIHTC, keep construction costs down through value engineering and consider incorporating energy-efficient design features, which can also earn additional incentives. Planning your project timeline carefully will also help you secure credits at the right time.

5. Ensure Ongoing Compliance
   Maintaining compliance with LIHTC is essential for the long-term success of your project. This includes submitting regular reports on tenant income and rents and ensuring that the property remains affordable for the full compliance period.

Secure the funds for your next project

At Hestia Housing Company, we specialize in helping developers maximize the full potential of the LIHTC program to secure the funding and resources necessary for successful, high-impact affordable housing projects. With our deep industry knowledge and established network, we’re equipped to guide you through every step, from application to compliance, ensuring your project is both financially viable and sustainable.

Reach out today to explore how we can help elevate your next development and leverage LIHTC to its fullest potential.