Low Income Housing Tax Credit
The Low Income Housing Tax Credit (LIHTC) program was created by the Tax Reform Act of 1986 as an alternate method of funding housing for low and moderate-income households, and has been in operation since 1987. The LIHTC Program may seem complicated, but many local housing and community development agencies are effectively using this program to increase the supply of affordable housing in their communities.
Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents.
Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their Federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing.
Each year, the IRS allocates housing tax credits to designated state agencies, such as the Pennsylvania Housing Finance Agency (PHFA), which in turn award the credits to developers of qualified projects. Each state is limited to a total annual housing tax credit allocation of $1.75 per resident, with only the first year of the 10 years of tax credits counting against the allocation. Beginning in 2003, this limit was adjusted for inflation.
States allocate their available housing tax credits through a competitive process. PHFA must develop a plan for allocating the credits consistent with Pennsylvania's Consolidated Plan. Federal law requires that the allocation plan give priority to projects that (a) serve the lowest income families; and (b) are structured to remain affordable for the longest period of time. Federal law also requires that 10 percent of each state's annual housing tax credit allocation be set aside for projects owned by nonprofit organizations.
The credit amount for a project is calculated based on the costs of development and the number of qualified low-income units, and cannot exceed the amount needed to make the project feasible.
A state has two years to award housing tax credits to projects. Tax credits that are not awarded in one year may be carried forward to the next year. If a state is unable to use its tax credits over a two-year period, they are returned to a national pool for re-allocation. If a state awards tax credits to a project that is not completed and the tax credits are returned, the state has an additional two years to award the tax credits to another project within that state.
In 1993, HAIC established a non-profit affiliate, the Housing Alliance of Indiana County, Inc., which has participated in the development of 19 affordable housing communities financed through the LIHTC program within Indiana County as well as Allegheny, Armstrong, Mercer and Somerset counties. The Housing Alliance is a partner in the majority of these developments.
HAIC manages and maintains twelve (12) tax credit developments within Indiana County, consisting of 238 units nestled within quaint villages and small towns, as well as others that are situated in some of the most economically thriving and highly desirable locations throughout our county. You can learn more about these sites by visiting our Properties link.
To apply for any of our Property Management sites, you can find an
application in the Document Library section of our website.
Please fill it out in its entirety and return it to our office:
104 Philadelphia Street
Indiana PA 15701
If you have any questions in regard to our Property Management Program or
the application, you may contact our office at 724-463-4730