Wednesday, 30 June 2021 / Published in Base4

LIHTC 101 | A tax incentive program for developers

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The demand for new housing products right now is strong, but aside from traditional financing challenges, there’s a factor stopping developers—and that is rising construction costs. As a developer, you need to take advantage of every opportunity to make a project profitable—LIHTC might be that opportunity. Read on!

LIHTC stands for Low Income Housing Tax Credits. It provides a tax incentive to construct or rehabilitate affordable rental housing for low-income households. It’s a tax incentive program put out by the U.S Department of Internal Revenue Service or IRS to incentivize developers to build housing for lower-income families.

A LIHTC design proposal, as a HUD program, will have VERY SPECIFIC design requirements, including minimum unit mix, minimum unit sizes, and other submission processes, all of which vary from state to state.

The current administration is proposing to invest an additional $55 billion in tax credits, enabling the creation of tens of thousands more units per year.

A wide variety of properties can be eligible for the Low-Income Housing Tax Credit. Still, there are more developers competing for credits than there are credits, as they are allocated based on state population. To qualify for the LIHTC, a project must meet one of the following conditions:

Benefits of LIHTC

Under the program, state housing agencies issue credit allocations to developers who then sell the credits to investors. Investors receive a dollar-for-dollar reduction in their federal tax liability over 10-years, and developers invest the equity raised to build or acquire apartments.

Developers need a trusted and experienced design partner to assist with Affordable Housing projects! You need a design partner who understands how to create an efficient and high-quality living space with affordable construction options using industrialized construction methods. BASE4 is here to help!

I Want an Affordable Housing Project!

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