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ABOUT LIHTC
- (Low Income
Housing Tax
Credit)
Section 42 of
the Internal
Revenue Code
provides
federal tax
credits as an
incentive and
financing tool
to promote the
development of
multifamily
housing units
for low-income
residents. The
tax credits
are available
for new
construction,
as well as for
the
acquisition
and
rehabilitation
of existing
facilities.
Although
the tax
credits are a
federal
program, the
administration
and allocation
of the credits
are managed by
the housing
finance agency
of each state.
Each year the
state is
allocated a
limited number
of tax credits
based upon
population. On
a competitive
basis,
interested
developers
apply to the
state’s
housing
finance agency
for approval
of the tax
credits. This
application
process is
guided by the
Qualified
Allocation
Plan (QAP) of
each state.
The
tax credits
awarded to a
project can be
used by the
developer or
“sold” to an
investor in
exchange for
equity
capital. MPEG
is just such
an investor,
interested in
working with
developers to
purchase the
tax credits of
qualified
projects.
CURRENT
RATES:
For the 70% credit projects, the HERA of 2008 allows buildings placed in service after July 30, 2008, and before December 31, 2013, to use the minimum rate of 9%. No similar flat rate was set for 30% credits.
LIHTC
RATES |
2011 |
2012 |
2013 |
30% |
70% |
30% |
70% |
30% |
70% |
| January |
3.29% |
7.67% |
3.19% |
7.44% |
3.16% |
7.36% |
| February |
3.32% |
7.75% |
3.18% |
7.42% |
3.17% |
7.40% |
| March |
3.33% |
7.78% |
3.18% |
7.42% |
3.18% |
7.43% |
| April |
3.33% |
7.78% |
3.19% |
7.44% |
|
|
| May |
3.33% |
7.77% |
3.21% |
7.48% |
|
|
| June |
3.31% |
7.73% |
3.18% |
7.43% |
|
|
| July |
3.29% |
7.68% |
3.16% |
7.37% |
|
|
| August |
3.28% |
7.66% |
3.15% |
7.36% |
|
|
| September |
3.26% |
7.60% |
3.15% |
7.35% |
|
|
| October |
3.20% |
7.48% |
3.16% |
7.38% |
|
|
| November |
3.19% |
7.44% |
3.16% |
7.38% |
|
|
| December |
3.20% |
7.47% |
3.16% |
7.38% |
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The
development of
affordable
housing is
often made
possible
through a
combination of
funding
sources such
as loans,
grants, and
tax
credits.
Through the
use of tax
credits,
developers are
able to rely
heavily upon
"equity
capital" in
the financing
structure of
the LIHTC
properties.
The tax credit
equity capital
component can
often account
for as much as
75% of the
total project
financing.
This large
percentage of
equity (rather
than debt)
allows
property
owners to
maintain lower
rent levels,
providing a
more
affordable
option to
low-income
residents.
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