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:
|
LIHTC RATES |
2008 |
2009 |
|
30% |
70% |
30% |
70% |
| January |
3.40% |
7.93% |
3.28% |
7.65% |
| February |
3.40% |
7.92% |
3.23% |
7.53% |
| March |
3.36% |
7.84% |
3.27% |
7.63% |
| April |
3.36% |
7.84% |
3.29% |
7.67% |
| May |
3.34% |
7.80% |
3.28% |
7.65% |
| June |
3.38% |
7.89% |
3.30% |
7.71% |
| July |
3.40% |
7.93% |
3.35% |
7.82% |
| August |
3.40% |
7.94% |
3.35% |
7.82% |
| September |
3.40% |
7.93% |
3.36% |
7.84% |
| October |
3.37% |
7.87% |
3.33% |
7.78% |
| November |
3.36% |
7.83% |
3.33% |
7.76% |
| December |
3.36% |
7.84% |
3.34% |
7.79% |
|
|
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.
|
