what are low income housing tax credits?
The Low Income Housing Tax Credit (LIHTC) program was created by Congress in 1986 as Section 42 of the Federal Tax Reform Act. Its purpose is to encourage the construction and rehabilitation of low income rental housing by providing a federal income tax credit as an incentive to investors. Both individual and corporate investors may receive 10 years of tax credits in return for investing equity capital into the development of eligible housing projects.
how do they work?
Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents.
If the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.
creating strong communities
Hear from residents, developers, architects, and contractors as they discuss affordable housing’s role in helping to shape sustainable communities.
impact in colorado*
The need for affordable rental housing is significant. In Colorado, a household must earn $26.56 per hour to afford the median rent of $1,381 per month. Nearly 356,500 Colorado renter households (48.5 percent) spend more than 30 percent of their income on housing. *Data source: American Community Survey 2013-2017 5-Year Data Set
lihtc investment in colorado (as of 01.01.2019)
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