Learn About Low Income Housing Properties

The database consists of information such as a project's address, number of units and low-income units, when the credit was allocated and more. These affordable housing options have been in service for the last few decades. Landlords and housing developers benefit from the LIHTC program just as much as low-income individuals and families do. Read more about the Low-Income Housing Tax Credit program and see how it can benefit you.

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Data Sourced from The U.S. Department of Housing and Urban Development's (HUD's) Office of Policy Development and Research (PD&R).

The Low-Income Housing Tax Credit program, (commonly pronounced as “lie-tech”), was created after the Tax Reform Act of 1986. Local and state LIHTC-allocating agencies receive nearly $8 billion in their budget to issue tax credits for the acquisition, rehabilitation or new construction of rental housing for lower-income neighborhoods.

Tax credits are distributed to each state’s tax credit allocation agencies and the credit amount is based on state population. The benefits of tax credits encourage housing developers to help establish new opportunities for low-income housing that meet the federal program requirements.

How does LIHTC work?

Individual states assess the housing needs of their communities and establish a Qualified Allocation Plan (QAP) process. The QAP will set out a state’s eligibility priorities and criteria for awarding federal tax credits to housing property developers.

Developers or investors that meet a state’s eligibility criteria will receive sizable tax credits. Although the program costs the federal government a significant loss in tax revenue, the benefits outweigh the disadvantages. For example, even though there is a tax deficit due to the program, the properties that are restored or constructed offer affordable housing to low-income families.

By doing so, local areas receive a boost in their economy due to the creation of jobs and influx of residents.

Investors and developers who are looking to take advantage of LIHTC by expanding low-income housing in their area will be required to submit a project proposal to a local LIHTC-allocating agency. Tax credits distribution can be highly competitive between developers in certain areas of the country.

In some cases, developers and investors share equity in a project. For these situations, the tax credit is divided up based on the LIHTC Partnership Structure scale.

After a Housing Project Is Approved

Once a housing project has been approved and tax credits have been awarded, the development must then be completed and the total costs must be certified by the LIHTC agency. Once the LIHTC agency completes their review and certifies the costs, the rent of the housing is set to a scale that is acceptable by the local HUD housing agency. Generally, rent limitations are set up based on the median gross income of the surrounding area.

Afterward, the project is placed into the housing agency’s portfolio of Section 8 housing that is available in the area. Housing projects are awarded tax credits over a ten year period. As such, landlords and housing developers must continue to participate in the program long-term. Buildings cannot be sold or transferred while it is being used as public housing as a part of the LIHTC program.

Maintaining Eligibility for LIHTC Tax Credits

In order to continue to receive tax credits, housing developments must remain compliant with federal regulations. For example, one rule states that a project may not be sold or transferred to another owner for at least 15 years. In some cases, local housing agencies may require an even longer period of time to pass before a property can be sold.

Additionally, the management of a property that receives tax credits must be certified as compliant to all regulations before housing is offered to low-income tenants. There are various certification programs available locally such as The Housing Credit Certified Professional (HCCP), National Compliance Professional (NCP) and the Specialist in Housing Credit Management (SHCM).

Note: Failure to comply with LIHTC rules and regulations can result in fines, loss of future tax credits and other penalties.

Federal Standards for Public Housing Buildings

In order for a housing development to be eligible to receive tax credits from the LIHTC program, their buildings must meet certain standards. Currently, over 1 million public housing units in the United States are meet these criteria.

Local housing authorities are responsible for ensuring that all landlords and housing developers are adhering to federal guidelines that have been established by the HUD. Typically, housing authority inspectors will check the following aspects of a property:

  • The condition of the building’s floors, ceilings and walls.
  • The maintenance and security setup of the property.
  • Buildings will all be inspected for any leaks.
  • A pest and rodent inspection will be performed.
  • Potential electrical hazards on the property and in the surrounding area.
  • Basic appliances must all be working properly.
  • The building is equipped with smoke detectors.
  • All stairs, balconies and railings must be safe.
  • Housing units must have sinks, toilets and water heaters.
  • Buildings must be accessible for individuals living with disabilities.
  • Fire exits and extinguishers must be properly designated.
  • Water and air quality will be inspected.
  • Buildings must have sufficient lighting and heat.
  • There must be adequate ventilation in the building.

After a building has been checked and verified by the local housing authority, the unit will be placed on the Housing Agency’s public housing list. These lists will help low-income individuals and families locate subsidized housing options.

Even after a housing unit has been approved, property owners are responsible for maintaining federal housing standards on all their buildings. Buildings that have been approved by a Housing Agency will be inspected yearly or in the event of a tenant filing a complaint about the building’s status.

Note: These standards apply to both single-family and multi-family homes.

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