LIHTC Income Limits, Rent Limits and Utility Allowances

Section 42 Low Income Housing Tax Credit (LIHTC) properties impose maximum household income limits that are based upon Area Median Income (AMI). Rent restrictions are also derived from the AMI and tenant-paid utility costs (the “utility allowance”.) AMI varies depending location and household size and is revised annually. However, a household is not required to vacate a unit if its income later exceeds the LIHTC limits. At least 20% of…

LIHTC Set Asides (Income Averaging | 20/50 | 40/60 ) and Area Median Income (AMI)

Section 42 Low Income Housing Tax Credit (LIHTC) properties are restricted by the “minimum set aside” and Area Median Income (AMI). LIHTC MINIMUM SET-ASIDE (20-50 vs. 40-60 vs. Income Averaging) LIHTC properties must dedicate a minimum percentage of their housing units to affordable housing. Since the creation of the LIHTC program, developers have been able to choose from one of two setasides: 20-50 Test: A minimum of 20% of the…

How to Calculate Maximum LIHTC Rents: Gross Rent vs. Net Rent

The amount of rent that is payable by a low income housing tax credit (Section 42 LIHTC) tenant is referred to as “net rent.” The maximum net rent that is allowed under the tax credit program is derived from a “gross rent” amount; therefore, it is necessary to first calculate the gross rent prior to determining the net rent. (Please note that LIHTC maximum rents are not based upon comparable…

Understanding the LIHTC (Low Income Housing Tax Credit)

Introducing the LIHTC The Section 42 Low Income Housing Tax Credit (LIHTC) program is a federal tax incentive that encourages private sector investors, developers and lenders to finance, construct and operate affordable housing. Since the program’s founding in 1986, LIHTC tax credits have been allocated for the construction and rehabilitation of more than three million housing units. About one of every six units of new rental housing built in the…