Do You Know What LIHTC Means?

LIHTC or low income housing tax credit is a federal program. This program is defined by the Internal Revenue Code (Section 42) and was enacted by Congress in 1986. The purpose of this program is to help provide affordable rental housing to low income families by giving developers tax credits. The low income housing tax credit provides a credit against future tax liabilities or a reduction in the amount of liability, on a dollar for dollar basis. The developers can either use the credits themselves or they can sell them to raise capital for their projects.

This program is the best resource that developers have to raise equity for projects that wouldn't otherwise work. Otherwise, if developers have to raise the capital without the tax credits, then the cost of borrowing the capital would be high. Then the rents would have to be higher to justify the project.

Return From LIHTC to Commercial Glossary