Housing Credit Program FAQs

The Low-Income Housing Tax Credit (Housing Credit) is a federal tax credit created by the Tax Reform Act of 1986 and designed to encourage private-sector investment in the new construction, acquisition, and rehabilitation of rental housing affordable to low-income households. Since its creation, the Housing Credit has become the most successful affordable rental housing production program in history.

The Housing Credit offers a dollar-for-dollar reduction in a taxpayer’s income tax liability in return for making a long-term investment in affordable rental housing. State agencies award Housing Credits to developers, who engage private investors in the property’s ownership partnership. The investors provide upfront equity capital to fund the construction and rehabilitation of affordable housing, allowing developers to borrow less money and pass through the savings in lower rents for low‐income tenants. Investors, in turn, receive a 10‐year stream of tax credits based on the cost of constructing or rehabilitating apartments that must be rented to low-income households.

The program allows state Housing Credit agencies to allocate Housing Credits to developments they select pursuant to qualified allocation plans (QAPs) they develop that identify the type, location, and other characteristics of affordable housing needed throughout their states. The QAPs must describe the criteria agencies will apply in allocating the Credit and are subject to regular review through a public hearing and comment process. In this way, the Housing Credit empowers states to respond to the housing needs, priorities, and challenges they consider most important and to respond to changing housing priorities or challenges.

The NCSHA Housing Credit FAQs document covers the following:

• What is the Housing Credit?
• What are the 9 Percent and 4 Percent Credits?
• Whom does the Housing Credit serve?
• Why is the Housing Credit necessary?
• How much housing has been developed because of the Housing Credit?
• What does the Housing Credit cost?
• Who administers the Housing Credit and oversees program compliance?
• Who oversees the Housing Credit’s administration at the federal level?
• What is the Housing Credit’s economic impact?
• Does the Housing Credit leverage other funding?
• Would the private sector finance affordable housing without an incentive like the Housing Credit?
• Doesn’t the Housing Credit just enable corporate investors to reduce their tax liability?
• How well do Housing Credit properties perform?
• In addition to affordable housing, what other benefits does the program provide?
• How did Congress recently expand production with the Housing Credit?
• How can Congress further strengthen the Housing Credit program?