What Is Tax Credit Property
A tax credit property is a residential building developed or rehabilitated using Low-Income Housing Tax Credits (LIHTC) funding. These properties must maintain income-restricted rents and serve households earning no more than 60% of the area median income (AMI), though some properties serve households at 50% AMI or lower. The property owner receives federal tax credits in exchange for keeping rents affordable for a compliance period, typically 15 years minimum.
Key Details
- Income limits: Tenants must earn between 50% to 60% of AMI depending on the property's specific LIHTC award. A household at 60% AMI in a median income area of $80,000 would have a maximum household income around $48,000.
- Rent restrictions: Rents are capped at 30% of the AMI-based income limit, regardless of market rates. This means a unit restricted to 60% AMI cannot exceed $1,200/month in a $80,000 AMI area.
- Section 8 compatibility: Tax credit properties can accept Housing Choice Vouchers. When a Section 8 tenant uses a voucher at a tax credit property, the rent cannot exceed either the tax credit rent limit or the HUD Payment Standard for that area, whichever is lower.
- NSPIRE inspection requirements: Tax credit properties must still pass HQS inspections if they participate in Section 8. They must also comply with their LIHTC program requirements simultaneously, which can mean stricter lead-based paint rules and additional maintenance standards.
- Affordability lock-in: Once a property receives LIHTC, it remains subject to income and rent restrictions for the entire compliance period. Property owners cannot convert units to market-rate housing during this time without returning tax credits.
- Fair Market Rent considerations: While Fair Market Rent (FMR) sets the ceiling for Section 8 payments, tax credit properties often operate below FMR due to their affordability requirements.
Common Questions
- Can I use my Section 8 voucher at a tax credit property? Yes, but the rent must meet both the tax credit limit and HQS standards. Your PHA must approve the lease, and the rent cannot exceed the lower of the two payment amounts.
- What happens if I earn too much for a tax credit property? Some properties allow a small percentage of units (typically up to 20%) to serve households above the income limit. Otherwise, you would need to move to a different property or lose your eligibility.
- Are tax credit properties better maintained than other Section 8 units? Tax credit properties often maintain higher standards due to dual compliance requirements with LIHTC and HQS programs. However, enforcement depends on local PHA monitoring and LIHTC program monitoring agencies.