What is the main purpose of the Low-Income Housing Tax Credit (LIHTC)?

The main purpose of the Low-Income Housing Tax Credit (LIHTC) is to incentivize the development of affordable rental housing. This program, established by the Tax Reform Act of 1986, is crucial for encouraging private developers to create and rehabilitate affordable rental units for low-income households. By providing tax credits that can be sold to raise capital, LIHTC enables developers to reduce costs and thereby offer affordable rents, thus addressing the pressing need for housing that is accessible to low-income individuals and families.

The structure of the LIHTC program is such that it specifically targets areas with high housing need and promotes the development of housing that remains affordable for a set period, typically 15 to 30 years. This not only helps to expand the availability of low-income housing but also stimulates economic activity in communities by creating jobs in the construction and property management sectors.

By focusing on the development of affordable rental housing rather than on other types of assistance or housing projects, LIHTC plays a vital role in addressing the complex challenges of housing affordability in many regions.