What the Low-Income Housing Tax Credit actually is

The Low-Income Housing Tax Credit (LIHTC) is a federal tax incentive that encourages private developers and nonprofits to build or renovate rental housing for people with lower incomes. The government does not build or own these properties — instead, it gives tax credits to investors who fund projects that agree to keep rents affordable for a set period, usually 30 years. This means LIHTC properties are privately owned and managed, but legally bound to serve tenants below certain income thresholds.

The credit works like this: a developer proposes a project, the state housing finance agency awards tax credits based on need and project quality, investors buy those credits to reduce their federal taxes, and the money raised goes toward construction or renovation. The property then operates as a regular rental building, but with income limits and rent caps written into a long-term agreement. You do not explore for the tax credit itself — you explore to rent an apartment in a building that was built or improved using it.

LIHTC properties exist in every state and most counties. They range from small apartment buildings to large complexes, and from newly built to recently renovated. Some are run by nonprofits, others by for-profit management companies. The only thing they have in common is that a portion of their units (sometimes all of them) must remain affordable to households earning below a set percentage of the area median income — usually 50%, 60%, or 80%.

Key Takeaways

  • LIHTC properties are privately owned buildings where a percentage of units must stay affordable for 30 years because investors received federal tax credits to fund them.
  • Income limits vary by property and by area, but typically range from 50% to 80% of the area median income — you must earn below that threshold to rent an affordable unit.
  • Your state housing finance agency awards the tax credits and keeps a list of properties; this is usually your fastest way to find available units.
  • Rent in LIHTC units is capped by law, but the cap is based on income level and area, so the same building may have different rents for different units.
  • Once you move in, your rent is protected from large increases as long as you stay and the property remains under the LIHTC agreement.

Income limits: what they mean and how they work

Every LIHTC property has an income limit — a maximum household income you cannot exceed to rent an affordable unit. This limit is set as a percentage of the area median income (AMI) for your county. If the area median income is $60,000 and the property's limit is 60% AMI, your household income cannot exceed $36,000 to may have access to for that unit.

A single building often has units at different income tiers. One building might have some units for households at 50% AMI, others at 60% AMI, and others at 80% AMI. This means the same address can have different rent levels depending on which unit you are assigned. When you inquire about a vacancy, ask which income tier that specific unit belongs to — your income must fall below that tier's limit.

Income limits change every year based on updated area median income figures. The U.S. Department of Housing and Urban Development (HUD) publishes new limits each spring, so a property's limit this year may be slightly higher or lower than last year. If you were just over the limit last year, you might now may have access to. If you are currently renting and your income rises, you may eventually exceed the limit — but most LIHTC agreements allow you to stay at your current rent even if your income later exceeds the limit, as long as you do not move out and move back in.

How to find LIHTC properties in your area

Your state housing finance agency maintains a searchable database of LIHTC properties. This is the most direct route: go to your state's housing finance agency website (search "[your state] housing finance agency"), look for a property search tool or LIHTC directory, and filter by county or city. The database usually shows the property address, contact information, current vacancies, and income limits for each unit type.

If your state's database is difficult to navigate, call your state housing finance agency directly and ask for a list of LIHTC properties in your county. Staff can tell you which properties currently have openings and which income tiers those units serve. This phone call often saves time because online databases are not always updated in real time.

You can also search the National Housing Preservation Database (NHPD) at preservationdatabase.org, which lists LIHTC properties nationwide. Filter by state and county, and the database shows property names, addresses, phone numbers, and sometimes current availability. This tool is useful if your state's own database is incomplete or hard to use.

Local nonprofits that work on housing issues often maintain their own lists of affordable properties, including LIHTC buildings. Call your local housing authority or a community action agency and ask if they have a current list of LIHTC properties taking applications. They may also know which properties have the shortest wait lists or most recent openings.

The process and move-in process

Each LIHTC property manages its own applications and waitlists — there is no single process form or central system. When you find a property with an opening, you contact the property management office directly by phone or in person. They will ask you to complete an process, which typically includes proof of income (recent pay stubs, tax returns, or a benefits letter), identification, and rental history or references.

The property will verify your income against the unit's income limit. You will need to show documents proving what your household earned in the past 12 months. If you are unemployed, on disability, or receiving benefits, bring documentation of those payments. The property cannot reject you solely because you have no rental history, but they may check references if you have rented before.

Processing time varies. Some properties move quickly and can tell you within a week whether you are approved. Others have long waitlists and may take several weeks or months. Ask the property manager how long the current wait is and whether they are currently reviewing applications or adding names to a list.

Once approved, you will sign a lease. The lease will state your rent amount, which is capped by the LIHTC agreement and cannot exceed the maximum allowed for your income tier. Your lease will also note that the property is subject to LIHTC restrictions — this is standard and protects you because it means the rent cap is legally binding.

Rent caps and what happens to your rent over time

In an LIHTC unit, your rent is not set by the market — it is set by a formula based on your income and the area's cost of living. The property calculates rent as either 30% of your household income or a flat amount set by HUD, whichever is lower. This means if your income is very low, you pay 30% of what you earn; if your income is higher but still below the limit, you pay the HUD-set amount, which is typically lower than 30% of your income.

Rent increases are capped. Most LIHTC leases allow annual increases tied to inflation (usually the Consumer Price Index) or a fixed percentage set by the property, but these increases are much smaller than market-rate increases. A property cannot raise your rent by 10% in one year just because the neighborhood is gentrifying. The increase is limited by the LIHTC agreement.

If your income decreases, your rent may decrease. Some properties recalculate rent annually based on updated income documentation. If you lose a job or your hours are cut, tell the property manager — your rent might go down. If your income increases, your rent will likely increase, but it cannot exceed the maximum allowed for your unit's income tier.

The rent cap protection lasts as long as you live in the unit and the property remains under the LIHTC agreement (usually 30 years from the date the property received credits). If you move out and move back in later, you may face a new rent calculation based on current income limits and your new income at that time.

What to check before you explore

Before submitting an process, confirm three things: your household income is below the property's income limit for the available unit, the property is currently accepting applications (not just maintaining a waitlist), and you understand what documents you need to bring. Calling ahead saves you a wasted trip and process fee if one is charged.

Ask the property manager about lease terms, move-in costs, and any fees. LIHTC properties must follow fair housing law just like any other rental, so they cannot charge you more or impose different terms based on race, color, national origin, religion, sex, familial status, or disability. If a property seems to be treating you differently than other applicants, that is a red flag.

Find out whether utilities are included in the rent or billed separately. In some LIHTC properties, water and trash are included; in others, you pay them. This affects your actual monthly cost. Also ask about lease length — most are one year, but some properties offer shorter or longer terms.

What happens if the property's LIHTC agreement ends

LIHTC agreements typically last 30 years. When that period ends, the property owner is no longer required to keep rents affordable or maintain income restrictions. This does not mean you will be evicted, but it means the property can convert to market-rate pricing when leases renew. If you are still living there when the agreement ends, you have the same tenant protections as any renter — your landlord must follow state eviction law and give proper notice — but they can raise your rent to market rate when your lease expires.

Some properties extend their LIHTC agreements beyond 30 years, and some are purchased by nonprofits or public agencies that commit to keeping them affordable permanently. But this is not may provide. If you are renting in an LIHTC property nearing the end of its agreement period, start planning ahead. Ask the property manager whether the owner intends to extend the LIHTC agreement, and if not, begin looking for your next affordable home.

Frequently Asked Questions

Do I have to prove my income every year?

Most LIHTC properties recertify income annually, meaning you will need to provide updated pay stubs, tax returns, or benefit letters each year. This is how they verify you still meet the income limit. If you do not provide documentation, the property may consider you in violation of your lease, though they must give you notice and a chance to comply first.

Can a property evict me if my income goes above the limit?

No. LIHTC rules protect you from eviction based on income increase. If your income rises above the limit, your rent will increase (usually to the maximum allowed for your unit tier), but you cannot be evicted. You can stay in the unit as long as you pay the new rent and follow lease terms.

What if I find an error in how the property calculated my income?

Ask the property manager to review the calculation with you. Bring any documents that show the correct figure — a corrected pay stub, an updated benefits letter, or a tax return. If the property refuses to correct an obvious error, contact your state housing finance agency and file a complaint. The agency can investigate and require the property to recalculate.

Are LIHTC properties only for seniors or people with disabilities?

No. Most LIHTC properties serve families of any age and composition, as long as income is below the limit. Some properties do specialize in seniors or people with disabilities, but the majority are open to any household. Check the property's description to see if there are any age or disability restrictions.

Can I be denied because I have bad credit or an eviction history?

LIHTC properties can consider credit and rental history as part of their screening, but they cannot use these factors to discriminate. If you have an eviction or credit issue, some properties will still rent to you — it depends on their individual policy. Ask directly whether they consider past evictions or credit problems, and if you are denied, ask for the specific reason in writing.