Financing Affordable Housing with the LIHTC [External]

by CUI Staff


Recently, CUI’s Graduate Research Assistant Chris Thayer was published in the Federal Reserve Bank of Atlanta’s Partners Update feature. The article, “Financing Affordable Housing with the LIHTC,” covers the basics of the LIHTC program, the operation of LIHTC’s sometimes underutilized 4% Credit, and discusses the benefits and challenges of working with this less common credit type.

The availability of affordable housing in the Southeast is an increasing challenge, especially in areas of opportunity that have jobs, good schools, public transit, and so forth. The Atlanta Fed’s Community and Economic Development discussion paper “Declines in Low-Cost Rented Housing Units in Eight Large Southeastern Cities” puts some numbers to the depth of the problem, with metro Nashville showing a loss of over 7,700 low-cost rental units between 2010 and 2014.

In light of these challenges, sources of funding for affordable housing are more important, and competitive, than ever. One of the best-known and most competitive sources of funding for affordable housing construction is the Low-Income Housing Tax Credit program, or LIHTC. The most common form of the program, the 9 percent credit, is already a highly sought-after affordable housing construction subsidy, but LIHTC also offers a noncompetitive 4 percent tax credit. This 4 percent credit, typically paired with the development of affordable housing financed with state or local government-issued tax-exempt bonds, is a less often utilized financing strategy and still an important tool in the affordable housing tool kit (Novogradac, 2016e).

To read the article in full, please visit its Federal Reserve page.