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The LIHTC provides funding for the development costs of low-income housing by allowing an investor (usually the partners of a partnership that owns the housing) to take a federal tax credit equal to a percentage (either 4% or 9%, for 10 years, depending on the credit type) of the cost incurred for development of the low-income units in a rental housing project.
New York City's 80/20 housing program was created in 1985 and has financed developments in New York that meet the parameters ever since. Compared to market rate units in the same area, the affordable units in 80/20 developments had a disproportionately high number of women, single parent households, households with multiple children and minorities.
In terms of benefits of the LIHTC program, a 2011 analysis published in the Housing Policy Debate journal found that increases in the use of tax credits are linked to reductions in racial segregation in metropolitan areas. [34] This means that LIHTC projects do not tend to lead to increased segregation, even in areas with elevated poverty levels.
This is because LIHTC’s standard for affordability is based on the area median income of a large area, such as a county, as opposed to a more narrowly defined poorer community.
National Equity Fund, Inc. was founded by the Local Initiatives Support Corporation to be one of the first LIHTC syndicators, following the creation of LIHTC in the Tax Reform Act of 1986. LIHTC provides investors in affordable housing a dollar-for-dollar reduction in federal taxes in exchange for equity in new or refurbished affordable housing ...
These credits are administered by designated state agencies, and preference is given for the development of housing in low-income areas. [4] The Inclusive Communities Project is a Texas-based non-profit organization that helps low-income families obtain affordable housing. [ 5 ]
In 1988 LISC raised $51 Million for affordable housing project through LIHTC, and $77 Million in 1990. [16] [17] Although LIHTC was initially created as a temporary measure set to expire by 1989, its effectiveness prompted LISC and other organizations to advocate for its extension. In 1993, Congress granted LIHTC permanent status.
The Tax Credit Assistance Program (TCAP) is a Federal housing grant program administered by HUD which assists Low Income Housing Tax Credit (LIHTC) projects funded during 2007, 2008 and 2009. The TCAP program is part of the American Recovery and Reinvestment Act which was signed by President Obama on February 17, 2009.