Low Income Housing Tax Credit- a financing innovation to help build more supportive housing
Today, LIHTC helps finance the majority of supportive housing in New York State.
The Low Income Housing Tax Credit (LIHTC) was created in 1986 under President Reagan and made permanent in 1993 under President Clinton, around the same time that the supportive housing model was scaling up in New York. (The first New York/New York agreement was signed in 1990). Created through the federal Tax Reform Act, LIHTC ushered in a new era of affordable and supportive housing development, one that engaged and expanded the field of stakeholders and leveraged private investment.
What is the Low Income Housing Tax Credit?
The Low Income Housing Tax Credit is an indirect federal subsidy for low-income affordable rental housing. The program, administered by the U.S. Department of Treasury, acts as an incentive to private developers and investors to provide low-income housing. LIHTC provides a dollar-for-dollar credit against federal income tax liability, meaning for every tax credit you claim, you can reduce your federal tax bill by one dollar. Investors make a cash contribution, which functions as equity for a real estate deal, in exchange for future allocation of tax credits.
Pools of LIHTC are allocated to states based on a federal formula. In New York, NYS Homes and Community Renewal (HCR) and NYC Department of Housing Preservation and Development (HPD) have the authority to provide tax credits according to local priorities.
How does it help create supportive housing?
Before the Low Income Housing Tax Credit, supportive housing was entirely financed by grants and subsidized loans from the government. By enabling public-private partnerships, LIHTC brought new resources to the table.
In the early 1990s, LIHTC was first used to finance the rehabilitation of nine buildings in New York City to become supportive housing for low-income individuals and those who had experienced homelessness. In a process known as syndication, National Equity Fund and Enterprise helped nonprofit developers access LIHTC and connect their projects to investors.
Today, LIHTC helps finance the majority of supportive housing in New York State. 73% of the residences that opened in 2017 used the credit. The Network and our partners are deeply involved with efforts to expand and strengthen the program, including advocating that Congress pass the Affordable Housing Credit Improvement Act.
| More Posts about: What's New