There are many federal housing programs that make rent more affordable for low-income Americans. There are two main types of subsidy: rental subsidies and capital subsidies. Rental subsidies help tenants with their rent. The Section 8 Housing Choice Voucher (HCV) is the most famous form of rental subsidy.
Then there are the capital subsidies. These subsidies are provided in the form of loans, grants, and tax incentives for owners and developers of affordable rental housing communities. These grants provide critical capital to offset the cost of building housing to make rental affordable.
The most popular of the capital subsidy programs is the Low Income Housing Tax Credit (LIHTC) Program. The LIHTC is a dollar-for-dollar tax credit, not a deduction but a rebate on actual taxes owed, provided to owners of affordable rental homes. This tax incentive produces initial capital investments from investors such as banks, insurance companies, and other corporations.
As a tenant applying for residency in a LIHTC-funded community, what do you need to know?
Well first, in all likelihood, the good news is that the property, especially if built in the last 5-10 years, is a very nice place to live with floor plans and amenity packages that compete with market rate. and luxury apartment communities.
Developers in these communities must compete for tax breaks, often with up to $3 of financing requests competing for every $1 of available financing. Over the years, these funding contests have become something of a beauty contest in which maximum points are awarded to proposals for apartments with the best layout, most amenities, closest to transportation public, the most energy-efficient buildings, the most comprehensive resident service offerings, and the most affordable rents. .
Developers go to great lengths to score the most points in these financing contests and the results are beautiful, well designed, energy efficient and affordable apartments.
There are income restrictions for residents of LIHTC properties. At a minimum, to qualify for a LIHTC-financed apartment, one must earn 60% of the Area Median Income (AMI) or less. For example, in Houston, Texas, where the AMI for a family of four is $66,200, to qualify for a LIHTC-funded basic apartment, you need to earn less than $39,720.
Many LIHTC properties voluntarily target lower income individuals than the tax code requires. In many cases, properties have reserved units for a mix of incomes ranging from 30% AMI to 60% AMI. Some properties also incorporate units with no income restrictions in what the industry calls mixed-income development.
Rents for these units are always based on the income band they seek to serve, so the rent for a 30% AMI apartment could be half the rent for a 60% AMI apartment in the same apartment community .
When applying for residency in a LIHTC-funded apartment community, you can expect to pay an application fee, undergo a credit and criminal background check, go through a rigorous income verification process, and provide rental references who are sure to be contacted. by your prospective new landlord.
Most LIHTC communities are very well managed and the screening process for potential tenants is quite rigorous. This ensures that the apartment complex is occupied by good, law-abiding neighbors who pay their rent, making it a real community that everyone would be proud to call home.
