Low-Income Housing Tax Credit Apartments: What They Are and How They Help
- Author: Bryan Miller
- Posted: 2025-11-26
The Low-Income Housing Tax Credit (LIHTC) program plays a major part in making sure more affordable apartments are available for people with lower incomes.
Let’s break down how this program works and why it's important.
What is the Low-Income Housing Tax Credit?
The LIHTC is a federal program aimed at encouraging developers to build or renovate apartments that are affordable for low-income households. This is done by giving tax credits to developers.
In short, these credits lower the amount of money developers owe in federal taxes, making it more attractive for them to create affordable housing.
How Does the Program Work?
- The federal government gives tax credits to each state.
- State agencies then distribute these credits to developers who build or fix up affordable rental apartments.
- Developers can use these credits themselves, or sell them to investors to raise money for building the housing.
Why Are These Tax Credits Important?
For developers and investors, the LIHTC program means they get help paying for the construction of affordable homes, making it possible to build housing they otherwise might not afford.
For families and individuals, it means more apartments are available at lower rents.
The LIHTC program boosts the supply of affordable housing, supports local economies, and helps create stronger, more stable communities.
Example: New York State’s LIHTC Program
New York has its own version of the Low-Income Housing Tax Credit program. It uses tax credits to encourage developers to build or maintain affordable apartments for residents who need them.
How Do Developers Qualify?
To qualify for these credits in New York:
- Developers must propose projects that include apartments for people below certain income limits.
- They need to follow state rules about who can rent these apartments and how much rent can be charged.
- The process involves submitting detailed plans and showing how the project will benefit the local community.
- This program has a big impact—helping low-income families, seniors, and those struggling to find safe, affordable housing.
Who Can Live in LIHTC Apartments?
People who want to live in these apartments must meet income requirements. These are based on the median income for the area and the size of the household.
Usually, if your income is below a certain percentage of the local median, you may qualify.
These rules help make sure the apartments go to people who need them most.
IRS Section 42 and Compliance
The official part of the program is called “Section 42” of the IRS tax code. Developers must follow rules on who can rent apartments and how much rent can be charged.
They also have to keep these apartments affordable for a set number of years. Following these rules is required for developers to keep their tax credits.
Other Affordable Housing Programs
Besides LIHTC, there are other important programs, like:
- HUD Public Housing: Housing run by local agencies and supported by the federal government so rent can stay affordable.
- Section 8: Also known as the Housing Choice Voucher Program, it gives qualifying families rental vouchers to help pay for apartments in the private market.
- Public Housing: Buildings owned and managed by public agencies that rent apartments at reduced rates.
These programs—and government agencies like HUD—work together to make sure more people have a safe and affordable place to live.
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Check out: Making the Move from Renting to Homeownership in 2025: What to Know
