HOME and Low Income Housing Tax Credits (LIHTC)

Information by State  Print version   In This Section   LIHTC Basics   Calculating Housing Tax Credits   Using LIHTC with HOME Funds   Complying with Occupancy Requirements   Setting Rents   Establishing Tenant Eligibility

Introduction

The Low Income Housing Tax Credit (LIHTC) Program was created by Congress to generate equity capital for the construction and rehabilitation of affordable rental housing. However, tax credits alone are not always sufficient to allow developers to reduce the debt burden to a point where project costs can be paid solely through affordable rents allowed by LIHTC regulations. Often, developers must seek additional subsidies to make a low-income housing project feasible.

While it has been permissible to combine HOME funds with tax credits since the creation of the HOME program, technical differences between the programs restricted their combined use. Changes to Federal law in 1992 and 1993 addressed these differences, making it easier to apply both of these funding sources to a single development.

In the ten years since the creation of the HOME Program in 1992, over 59,000 units of affordable rental housing have been developed using both HOME and LIHTC funds, leveraging $1.34 billion HOME dollars with $3.82 billion LIHTC dollars. However, successfully using both sources of funding requires a thorough understanding of each program's requirements and awareness of how the requirements interact. This module will provide a basic overview of the applicable rules of each program, focusing on occupancy requirements, rent limits, and tenant eligibility. It will also discuss ways to select the most cost-efficient HOME and LIHTC investment mix. Because of the complexity of both programs and the consequences of noncompliance, individuals and organizations that decide to combine LIHTC and HOME funds are encouraged to seek further assistance.

After completing this module, you will be able to:

• Describe how LIHTCs work and who can use them;
• Recognize areas where rules and requirements of the LIHTC and HOME programs differ; and
• Identify where to obtain more information about the LIHTC Program.

Who is the audience for this module?

• Developers, investors, and other individuals or organizations interested in bringing HOME Program funds into a LIHTC project.
  
  
• PJs and other community development organizations interested in increasing the supply of affordable housing in their communities.

This module covers the following topics:

• LIHTC Basics
• Calculating Housing Tax Credits
• Using LIHTC with HOME Funds
• Complying with Occupancy Requirements
• Setting Rents
• Establishing Tenant Eligibility