Low-Income Housing Tax Credit: Policy Issue

Overview

The Low-Income Housing Tax Credit (LIHTC) has long served a successful public-private partnership that leverages federal dollars with private investment to produce affordable rental housing and stimulate new economic development in communities nationwide. 

Between its inception in 1986 and 2023, the LIHTC program has financed four million apartment homes and served over nine million households. This development has supported millions of jobs, generated $746.5 billion in wages and business income and $268.1 billion in federal, state and local tax revenues. 

Industry Position

The LIHTC program provides critical support to the nation's affordable housing production. Given that 11.34 million renter households spend more than half their income on rent, the National Apartment Association (NAA), alongside our partner the National Multifamily Housing Council (NMHC), strongly supported and led advocacy efforts for 2025 tax legislation that permanently increased credit authority by 12 percent and reduced the bond financing threshold to 25 percent to receive the full amount of four percent Low-Income Housing Tax Credits. 

As an Owner or Operator, How Does this Affect My Business?

Under the LIHTC program, state housing agencies issue credit allocations to developers who then sell the credits to investors. Investors receive a dollar-for-dollar reduction in their federal tax liability over a 10-year period and developers invest the equity raised to build or acquire apartments. This equity allows apartment firms to operate the properties at below-market rents for qualifying families. LIHTC-financed properties must be kept affordable for at least 30 years. 

Contact Information

To learn more about this issue, please contact NAA's Public Policy team.

For more Information:

Low-Income Housing Tax Credit Fact Sheet

The LIHTC program has two components: 

  • A nine percent tax credit that subsidizes 70 percent of new construction and cannot be combined with any additional federal subsidies; and 

  • A four percent tax credit that subsidizes 30 percent of the unit costs in an acquisition of a project and can be paired with additional federal subsidies.  

Given the nation’s severe shortage of affordable housing, Congress in recent years has enacted significant improvements to the LIHTC program. In July 2025, Congress permanently increased credit authority by 12 percent and reduced the bond financing threshold to 25 percent to receive the full amount of LIHTCs. In December 2020, Congress established a minimum 4 percent credit rate, akin to current law’s minimum 9 percent credit rate—so that investors may derive its full value. Under prior law, the 4 percent credit rate floated and was worth considerably less due to low interest rates. Additionally, in March 2018, Congress rightly increased LIHTC authority by 12.5 percent for 2018-2021. Congress also sensibly authorized income averaging so that LIHTC could serve a wider array of households.  

Congress should continue to invest in the LIHTC program’s success in future years so that it can remain a key driver of affordable housing development. A stronger LIHTC program enables developers of affordable housing to more quickly and effectively respond to the nation's housing needs. Specifically, establishing a minimum four percent tax credit rate for acquiring and rehabilitating apartment communities allows investors to derive the full value of the credit and developers to access greater financing resources.