Low Income Housing
Market History and
Opportunity

Investment
Strategy

Critical
Housing Needs

LIHTC:
First Ten Years

Category B and C
Properties

Affordability
Sector of the
Housing Market

Consumer Trends

Political Trends

Target Market
Critical Requirements

Active Housing
Finance Agency
Environment

Low Income Housing Market
History & Opportunity
Since its adoption in 1986, the Low Income Housing Tax Credit (the "LIHTC") has become the primary engine for the creation of affordable housing in the United States. Today, the nationwide tax credit portfolio numbers in excess of 1,400,000 units. When created as a part of the Tax Reform Act of 1986, the LIHTC represented the federal government’s first large-scale housing program in nearly a decade. The program provides federal tax credits over a ten-year period to developers of affordable rental housing, in return for which the developers must accept limits on both rents and the income of prospective tenants and may be subject to extended use restrictions.

Initially, projects receiving LIHTC’s were subject to a 15-year use restriction. The first of the projects developed under the LIHTC program are beginning to reach the end of their 15-year use restriction and are at risk of falling out of the affordable housing stock.

The original purpose of the Low-Income Housing Credit was to encourage private investment in the development of rental properties affordable to historically underserved income brackets.

This was eventually determined to be best represented by the income band between 30% and 60% of any given county’s (or metropolitan area’s) area median income, as determined by the Census Bureau and adjusted annually and for family size by the Department of Housing and Urban Development (a 1997 review of the Housing Credit program by the Government Accounting Office concluded that, at that time, the average tenant of a Housing Credit unit earned 37% of the area median income).

This encompasses the general perception of a segment of the renting public who were priced out of the unsubsidized, "market-rate" rental housing market, but who may be ineligible for, or do not desire to pursue, more "traditional" housing subsidies, such as Section 8 rental assistance, or even public housing (although, technically, these programs have limits closer to 80% of the area median). The term "working poor" eventually became the buzzword in the industry’s lexicon, and in subsequent public relations and lobbying efforts, became represented as working families, and traditionally lower-paid members of the community—service-sector workers, police officers, teachers, firefighters, and their families.