A tax credit apartment is a rental unit where the owner receives a federal tax credit for keeping rents below market rate
The owner of a tax credit apartment gets a dollar-for-dollar reduction in their federal income taxes in exchange for renting units at affordable prices to people earning below a certain income threshold. The federal government does not pay the owner directly. Instead, the owner claims the credit on their tax return each year for a set period — usually 30 years. This arrangement lets owners afford to charge less rent than they otherwise would.
You do not explore for tax credits yourself. The tax credit is between the owner and the IRS. What matters to you as a tenant is that your rent will be capped at a percentage of your income — typically 30 percent — and that percentage does not change even if your income rises, as long as you stay in the unit and remain within income limits.
Key Takeaways
- Tax credit apartments charge rent based on your income, not on what the market will bear, so your rent stays the same year to year unless your income changes significantly.
- You must earn below a set income limit to move in, and your income is verified when you explore and sometimes recertified each year.
- Rent is usually set at 30 percent of your gross monthly income, capped at a maximum amount set by the property owner.
- Tax credit apartments are funded through the Low-Income Housing Tax Credit (LIHTC) program, a federal program that has created millions of affordable units nationwide.
- Once you move in, you have the same tenant rights and protections as any other renter in your state, including the right to a habitable unit and proper eviction notice.
How income limits and rent calculations work
When you explore to a tax credit apartment, the landlord or property manager will ask for proof of your income — usually recent pay stubs, tax returns, or a letter from your employer. They compare your income to the area median income (AMI) for your county. Most tax credit properties limit tenants to households earning 50 to 60 percent of AMI, though some accept up to 80 percent AMI.
Once you are approved, your rent is calculated as a percentage of your gross income. The standard is 30 percent, so if you earn $2,000 per month, your rent would be $600. However, the property owner also sets a maximum rent amount. If 30 percent of your income exceeds that maximum, you pay the maximum instead. If your income drops, your rent drops with it — but if your income rises above the limit, you may be asked to move or your rent may jump to market rate when your lease renews.
Income recertification happens annually at most properties. You will bring updated pay stubs or tax documents to prove your current earnings. If your income has risen above the program limit, the property owner has the option to raise your rent or ask you to leave when your lease ends, depending on the program rules and your state's tenant protections.
The Low-Income Housing Tax Credit program and how it funds these apartments
The Low-Income Housing Tax Credit (LIHTC) is a federal program created in 1986 that gives tax credits to developers and owners who build or renovate rental housing for low-income households. Each state receives an annual allocation of credits based on population. Developers compete for these credits, and the state housing finance agency awards them to projects that meet program requirements.
The owner then sells or syndicates the credits to investors — usually large corporations or investment funds — who use them to reduce their federal tax liability. The money from that sale helps the owner pay for construction, renovation, or operating costs. In return, the owner agrees to keep a percentage of units affordable for a set period, usually 30 years from the date the building opens.
This structure means the federal government does not directly spend money on these apartments. Instead, it forgoes tax revenue from the owners and investors. The result is that owners can afford to charge lower rents than market rate while still covering their costs and making a reasonable return.
What happens if your income rises above the limit
If your income increases and you are recertified at a higher level, the property owner's response depends on the program rules and your lease terms. Some properties will allow you to stay at your current rent until your lease ends, then raise it to market rate or ask you to leave. Others may raise your rent when ready to market rate or a percentage above the tax credit limit.
Your state's tenant protection laws also matter. Some states require the owner to give you 30, 60, or 90 days' notice before raising rent or asking you to vacate. Check your lease and ask the property manager what their policy is if your income changes. If you receive a notice that seems to violate your state's rules, contact your local tenant rights organization or housing authority.
Tenant rights and protections in tax credit apartments
Living in a tax credit apartment does not change your basic tenant rights. You are may have access to to a habitable unit with working heat, water, plumbing, and electricity. The landlord must make repairs within the timeframe your state requires. You have the right to proper notice before eviction, and the landlord cannot evict you without going through the court system in your state.
Tax credit properties are subject to fair housing laws, so the landlord cannot discriminate based on race, color, national origin, religion, sex, familial status, or disability. Some states and cities add protections for source of income — meaning the landlord cannot refuse to rent to you because your income comes from a voucher, benefit, or other non-wage source.
If the property is managed by a nonprofit or public housing authority, there may be additional tenant protections or grievance procedures written into the program. Ask the property manager for a copy of the house rules and any tenant handbook when you move in.
Finding tax credit apartments in your area
Tax credit apartments are not listed in a single searchable database, but several tools can help you locate them. The National Housing Preservation Database (NHPD) at preservationdatabase.org lets you search by address or zip code to find properties that receive tax credits. HotSpots, a tool run by the National Housing Law Project, maps affordable housing by location.
Your local public housing authority or housing finance agency also maintains a list of tax credit properties. Call your city or county housing department and ask for a directory of affordable apartments. Many areas have a 211 service — dial 2-1-1 or visit 211.org — where staff can tell you which tax credit properties are currently accepting applications in your neighborhood.
When you contact a property, ask directly whether it is a tax credit property and what the current income limit is. Some properties mix tax credit and market-rate units, so confirm that the unit you are interested in is income-restricted before you explore.
Differences between tax credit apartments and other affordable housing programs
Tax credit apartments are different from public housing, which is owned and operated by local housing authorities and funded through direct federal appropriations. Public housing has its own rules, lease terms, and tenant protections that vary by authority. Tax credit apartments are privately owned but required to follow LIHTC program rules.
Housing vouchers (Section 8) are also different. With a voucher, you find your own apartment on the private market and the government pays a portion of your rent directly to the landlord. The landlord is not required to participate in the voucher program. With a tax credit apartment, the unit itself is designated as affordable, and you do not need a voucher to live there.
Some properties combine tax credits with other funding sources — for example, a building might have some units funded by tax credits and others by vouchers or public housing funds. Ask the property manager which program applies to the specific unit you are interested in.
Frequently Asked Questions
Do I need a housing voucher to live in a tax credit apartment?
No. Tax credit apartments are affordable by design, so you do not need a voucher. However, if you have a voucher, you may be able to use it in a tax credit apartment if the owner agrees. Ask the property manager whether they accept vouchers.
What if the property owner sells the building?
The new owner must honor the tax credit restrictions for the remainder of the compliance period — usually the full 30 years. Your rent protections and income limits stay in place. The new owner cannot suddenly raise rents to market rate or remove the affordable housing requirement.
Can I be evicted from a tax credit apartment for any reason?
No. You have the same eviction protections as any tenant. The landlord must have legal cause — nonpayment of rent, lease violation, or end of lease — and must follow your state's eviction process, which includes notice and a court hearing. Being in a tax credit apartment does not give the landlord extra grounds to evict you.
Will my rent stay the same forever?
Your rent will stay at 30 percent of your income as long as your income stays below the program limit and you remain in the unit. If your income rises above the limit, the owner may raise your rent or ask you to leave when your lease ends. If your income drops, your rent drops with it.
How do I know if an apartment is a tax credit property?
Ask the property manager directly. You can also search the National Housing Preservation Database or call your local housing authority. If the property advertises income-based rent and income limits, it is likely a tax credit property, but confirm before you explore.