LIHTC Overview

Since the inception of the Low Income Housing Tax Credit program in the 1986 Tax Reform, approximately $100 billion of investor equity has been put to work in the development of more than 2.5 million affordable housing units in the United States. The LIHTC program has proven to be the most effective vehicle for raising private-sector community investments.

Tax credits are allocated by each state's respective housing agency, based on a qualified application process. Realty developers are awarded tax credits to build affordable housing communities; private equity is used to acquire interests in these properties in exchange for a stream of tax benefits. LIHTC equity contributions allows the properties to operate with lower debt and rents than conventional apartments.

Some benefits of investing in LIHTC include:

• Excellent risk-adjusted returns,
• Lowest default rate of all real estate-related asset classes,
• Predictable 10- to 15-year benefit stream,
• Dollar-for-dollar tax credit benefits (also deductible against AMT),
• High-impact socially responsible investment,
• Regulatory (CRA) credit for community development, and
• Credits and passive losses can be carried back one year or forward up to 20 years.

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