Low-Income Housing Tax Credit Program

Contact: Multifamily Underwriting (860) 571-4237
                 Click here to download the Application.

The federal Low-Income Housing Tax Credit program gives developers a financing tool to provide affordable rental housing for people of limited income. Tax credits are a critical part of many multifamily financing proposals because without them, the rental income generated by an affordable housing complex would be insufficient to cover the costs of developing and maintaining the property. Developers who receive tax credits typically sell them to private investors who benefit from a reduction in tax liability. The proceeds from the sale generate equity for the development, reducing the need for debt financing, and enabling the owner to charge affordable rents.

Tax credits are allocated on a competitive basis through one or more funding rounds each year.

Set-Asides
To be eligible for low-income housing tax credits, the project developer must set aside a minimum percentage of units for low-income residents. This percentage must be maintained throughout the extended use period, usually at least 30 years. The minimum set-aside is either of the following:

• 20% of the units rented to tenants earning 50% or less of
    the area median income (adjusted for family size)
    established by HUD- www.hud.gov

• 40% of the units rented to tenants earning 60% or less of
    the area median income (adjusted for family size)
    established by HUD- www.hud.gov

The amount of the tax credits can be maximized by setting aside 100% of the units for low-income tenants.

Low-Income Housing Tax Credit Brochure (pdf format)

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