What the Low-Income Housing Tax Credit does, and who it reaches
The Low-Income Housing Tax Credit (LIHTC) is a federal tax incentive that pays developers and property owners to build or preserve rental housing for people earning below a certain income threshold. It does not give money directly to tenants or buyers. Instead, it reduces what developers owe in federal taxes, which lowers their costs enough to rent units at below-market rates or sell them at below-market prices.
The credit exists because building affordable housing is expensive, and market-rate rents do not cover the cost. LIHTC makes the math work by letting investors recoup part of their investment through tax savings instead of through higher rents. The result is that you may live in or purchase a property that would otherwise cost more than you can afford.
LIHTC is the largest federal program funding affordable rental housing in the United States. It produces roughly 100,000 units per year across all states combined, though the number varies by year and by how much funding Congress allocates. Most LIHTC units are rental apartments; a smaller number are for-sale homes.
Key Takeaways
- LIHTC properties rent or sell below market rate because tax credits reduce the developer's costs, not because the government pays your rent.
- Income limits vary by state, county, and property, but typically range from 50% to 80% of your area's median income — you must verify the specific limit for each property.
- LIHTC rental units are usually subject to rent restrictions for 15 to 30 years, meaning the affordable rent is locked in even if the market rises.
- You find LIHTC properties through local housing authorities, nonprofit housing developers, and online databases, not through a single national process.
- For-sale LIHTC homes may require you to stay in the property for a set period and may restrict your ability to sell at market price, so read the deed restrictions before you buy.
Income limits and how they work in your area
To rent or buy an LIHTC property, your household income must fall below a threshold set by the property owner and the state housing finance agency. That threshold is usually expressed as a percentage of your area's median income — commonly 50%, 60%, or 80% of area median income (AMI).
What counts as "your area" depends on the property's location. A property in a rural county uses that county's median income. A property in a city uses the metropolitan area's median income. The same income might may have access to you for one property and disqualify you from another across town, because the median income figures differ.
Income limits change every year. The U.S. Department of Housing and Urban Development (HUD) publishes new limits each spring, and state housing finance agencies update their LIHTC income thresholds accordingly. If you were told you did not may have access to last year, it is worth checking again — your income may now fall below the new limit, or the limit itself may have risen.
When you explore to rent or buy an LIHTC unit, the property owner will tell you the specific income limit for that property and ask you to document your household income. Bring recent pay stubs, tax returns, or a letter from your employer showing what you earn.
How long rents stay affordable in LIHTC rentals
LIHTC rental properties must keep rents below market rate for a minimum of 15 years from the date the property opens. Many properties commit to 30 years or longer. During that period, the owner cannot raise the rent above the LIHTC-restricted amount, even if the market rent climbs.
This restriction is written into the property's deed and is binding on any future owner. If the property is sold, the new owner must honor the rent restrictions. This is one of the main ways LIHTC protects tenants — your rent is not just low today, it is locked in at an affordable level for years to come.
After the restriction period ends, the owner is free to raise rents to market rate. Some owners choose to renew the LIHTC restrictions and receive another round of tax credits; others let the restrictions expire. You should ask the property manager how long the rent restrictions will last at any LIHTC property you are considering.
Finding LIHTC rental properties in your area
There is no single national database or process for LIHTC rentals. Instead, you search for properties through multiple channels depending on where you live.
Start with your local public housing authority or housing finance agency. Most states have a housing finance agency website that lists LIHTC properties currently accepting tenants. Some agencies maintain searchable databases by city or county; others publish lists you can call through. Your local housing authority can also point you toward nonprofits in your area that develop LIHTC housing.
Nonprofit housing developers often own and manage LIHTC properties. Search online for "affordable housing developer" or "community development corporation" in your city or county, then call and ask what LIHTC rentals they have available. Many nonprofits maintain waiting lists and will tell you when a unit opens.
Online platforms like HotPads, Zillow, and Apartments.com allow you to filter by "affordable" or "subsidized" housing, though not all LIHTC properties are listed on these sites. You can also call 211 (a free referral line) and ask for affordable rental housing in your area — the operator can tell you which properties are currently accepting applications.
Buying a home through LIHTC for-sale programs
A smaller portion of LIHTC funding goes to for-sale homes rather than rentals. These are typically single-family houses or condominiums sold to low-income buyers at below-market prices. The buyer finances the purchase through a mortgage, but the purchase price is lower than it would be without the tax credit subsidy.
LIHTC for-sale homes usually come with deed restrictions that limit how much you can sell the home for in the future. For example, you may be required to sell at the same restricted price if you move within 15 years, or you may be required to offer the home back to the nonprofit developer before you can sell it on the open market. These restrictions protect affordability but also limit your ability to build equity through appreciation.
Some LIHTC for-sale programs also require you to live in the home for a set period — often 5 to 10 years — before you can sell. This is to may support the program serves people seeking stable homeownership, not investors flipping properties.
You find LIHTC for-sale homes through the same channels as rentals: your state housing finance agency, local nonprofits, and your housing authority. Ask specifically about homeownership programs, as staff may not volunteer them if you ask only about rentals.
What to expect during the process and move-in process
When you find an LIHTC property accepting applications, the owner or property manager will ask you to complete an process form and provide proof of income. Bring recent pay stubs (usually the last 30 days), tax returns from the past two years, or a letter from your employer on company letterhead stating your salary. If you receive benefits, bring benefit award letters.
The property manager will verify your income against the LIHTC income limit for that property. This usually takes one to two weeks. If your income is above the limit, you will be denied. If it is below the limit, you move to the next step: a standard rental process and background check.
LIHTC properties still conduct credit checks, criminal background checks, and eviction history checks just like any other rental. Meeting the income requirement does not may provide approval. If you have an eviction on your record or a very low credit score, you may still be denied, though some LIHTC properties are more flexible than others.
Once approved, you sign a lease and pay a security deposit like any other rental. The rent you pay is the LIHTC-restricted amount, which is lower than the market rent for a comparable unit in your area.
How LIHTC interacts with other housing information
You can live in an LIHTC rental and also receive other forms of housing information, such as a Section 8 housing voucher. In fact, many LIHTC properties accept voucher holders. If you have a voucher, the voucher pays part of the rent and you pay the rest. The LIHTC-restricted rent is still lower than market rate, so your out-of-pocket cost may be lower than it would be in a non-LIHTC property.
If you are receiving emergency rental information or other temporary aid, living in an LIHTC property does not disqualify you from that information. However, the information program may count the lower LIHTC rent as your household's housing cost when calculating how much help you need.
For-sale LIHTC homes may be purchased using down payment information programs, Community Development Block Grants, or other local homeownership programs. Ask the nonprofit developer or your housing authority what programs can be combined with LIHTC homeownership.
Frequently Asked Questions
Do I have to pay back the tax credit if I live in an LIHTC property?
No. The tax credit is between the property owner and the federal government. You straightforward pay the restricted rent each month. You do not owe anything back, and the credit does not appear on your lease or affect your tenancy.
What happens to my rent if the property's LIHTC restrictions expire?
The owner can raise your rent to market rate once the restriction period ends. However, you have the same tenant protections as any other renter — the owner must give you notice (usually 30 to 60 days, depending on your state) before raising the rent. You can then decide whether to stay at the higher rate or move.
Can I be evicted from an LIHTC rental for any reason?
LIHTC properties must follow the same eviction laws as any other rental. You cannot be evicted without cause or without proper notice. However, LIHTC does not provide extra eviction protection — if you stop paying rent or violate your lease, the owner can evict you through the court system like any other landlord.
Is there a waiting list for LIHTC properties?
Some LIHTC properties have waiting lists; others accept applications on a first-come, first-served basis. It depends on the property and how many units are available. Call ahead to ask whether the property is currently accepting applications or if there is a waiting list.
Can I buy an LIHTC home if I have bad credit?
LIHTC for-sale programs often work with lenders who are more flexible about credit scores than conventional mortgage lenders, but you will still need to may have access to for a mortgage. Talk to the nonprofit developer about what credit score or financial history they require, and ask whether they can refer you to a lender experienced with LIHTC homebuyers.