ONGOING Low-Income Housing Tax Credit (LIHTC)
LIHTC is the largest source of affordable housing finance in the U.S. Projects are typically structured as LLC partnerships where a developer partners with tax-credit investors. LLCs are the standard entity type.
Quick Facts
| Field | Value |
|---|---|
| Authority | Internal Revenue Code Section 42 |
| Administered By | State Housing Finance Agencies (HFAs) — not HUD directly |
| HUD Role | Data, research, policy guidance; FHA financing often paired |
| Two Types | 9% credits (competitive, annual cap) & 4% credits (non-competitive, with tax-exempt bonds) |
| LLC Eligible? | YES — LLCs are the standard ownership entity |
How LLCs Participate
As Developer / General Partner
- Form a project LLC (single-asset entity)
- Apply for tax credit allocation from state HFA
- Manage construction and lease-up
- Earn developer fees
As Investor / Limited Partner
- Purchase tax credits through syndicators
- Receive federal income tax credits over 10 years
- Typical credit value: ~$0.90 per $1.00 of credit
- Also receive depreciation benefits
Application Process (Varies by State)
- Review your state's Qualified Allocation Plan (QAP) — sets priorities, scoring criteria, set-asides
- Prepare project concept — site control, market study, architectural plans, financing pro forma
- Submit application to state HFA during annual competitive round (9%) or as-available (4%)
- Receive allocation — state HFA awards credits based on scoring
- Syndicate credits — sell to investors via syndicators; investors become limited partners in project LLC
- Construct and place in service — 15-year compliance period begins
2026 Requirements (Example)
- 70% committed sources threshold at Project Concept stage
- 80% committed sources at full application stage
- Financial feasibility rates (set Nov 2025): Long-term tax-exempt 6.65%, 9% credit financing 6.85%
Links
- HUD LIHTC Database Data on all LIHTC projects — location, units, credits allocated
- HUD Chapter 12 — LIHTC (PDF) HUD guidance on LIHTC in conjunction with FHA programs
- IRS Form 8609 — Low-Income Housing Credit Allocation
- Novogradac LIHTC Basics Industry resource on LIHTC fundamentals
- NCSHA Housing Credit National Council of State Housing Agencies — find your state HFA