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LIHTC: How it works and who it serves

The Low-Income Housing Tax Credit (LIHTC) provides an incentive for affordable housing development, supporting 3 million rental homes since its inception in 1987. With the demise of other forms of government assistance for developing and preserving critically needed affordable rental housing, LIHTC is the primary means of support for this work. In The Low-Income Housing Tax Credit: Past Achievements, Future Challenges, the Urban Institute examines the history and future of this unique resource. The authors look at how changes in tax policy affect the efficacy of the tax credit and argue for new policy solutions to preserve and improve its use as a resource.  

The report discusses the critical role LIHTC plays in the country’s affordable housing “safety net,” the trajectory of the program (and overall affordable housing production) during the great recession of the last decade, and the importance of LIHTC in rural areas where other forms of subsidy are not readily available.  The authors examine the program’s strong points as well as its flaws, and the future outlook for LIHTC investment.  

Published simultaneously, a companion report, The Low-Income Housing Tax Credit: How It Works and Who It Serves, provides readers with the basics of this critically important but still poorly understood resource, including a description of the difference between 9% and 4% credits, and explanation of income eligibility and affordability requirements, and how the financing of LIHTC deals works.