The Low Income Housing Tax Credits Program (Housing Credits) promote the development of low-income rental housing through tax incentives. The program offers eligible property owners a 10-year tax credit for each unit created for low-income families.
Eligible activities include new construction or substantial rehabilitation of at least $20,000 per low-income unit or 20 percent of adjusted basis, whichever is greater. Projects that include acquisition and substantial rehabilitation of buildings that were last placed in service or underwent a substantial rehabilitation no less than 10 years prior to acquisition are also eligible for Housing Credits.
Nonprofit and for-profit developers of affordable housing are eligible for Housing Credits. The credit may be obtained two ways:
- Automatically, if the project will be financed with tax-exempt bonds
- Through an allocation by KHC from a competitive application process.
Housing Credits must be used for one or more rent-restricted units available for long-term, continuous rental use. Generally, at least 20 percent of the units in a project must be rented to tenants earning 50 percent or less of area median income or 40 percent of the units must be rented to tenants earning 60 percent or less of area median. Rents charged to tenants cannot exceed 30 percent of the income limit applicable to the unit size, less an allowance for tenant-paid utilities. Only the units rented to low-income persons in a building qualify for Housing Credit.
Buildings with four or fewer units are eligible for Housing Credits only if the project is part of a development plan of action sponsored by a state or local government or a qualified nonprofit organization.
Applicants can apply through the annual competitive round.