The Low-Income Housing Tax Credit (LIHTC) is a federal tax credit created through the Tax Reform Act of 1986, and administered by the IRS, to encourage private equity investment in affordable and public housing by commercial real estate stakeholders.
Tax incentives are provided in exchange for capital for development and/or financing costs directly used to create and preserve affordable housing, including new construction, acquisition, or rehabilitation of existing properties. These tax credits are proportionally set aside for each state based on population and are distributed to the state’s designated tax credit allocating agency. These state agencies then distribute the tax credits based on the state’s affordable housing needs and federal and state-specific program requirements. This is known as the Qualified Allocation Plan (QAP) process. The Federal Housing Finance Agency also recently increased the lending caps for Fannie Mae and Freddie Mac, which have been putting more capital into LIHTCs since 2018, to $100 billion per agency for five quarters. The FHFA will also require that 37.5 percent of agency lending be “mission-driven, affordable-housing” loans. Earlier this year, The Department of Housing and Urban Development (HUD) announced the start of a LIHTC Pilot Program, including an expedited review process for loan approvals for new construction or rehab tax credit projects.
Suraj Shrestha is an associate at Harborside Partners. He has been taking the lead role on research projects; to develop and implement online marketing strategies for search engine optimization and social media marketing. He is one of the core parts for helping to grow business revenue and the company’s online presence.