The Low-Income Housing Tax Credit (LIHTC) and Its Impact on Renters

In the face of a growing affordable housing crisis across the United States, the Low-Income Housing Tax Credit (LIHTC) program has become a cornerstone in the effort to provide safe, affordable rental housing for low-income families. Introduced in 1986, this federal tax incentive program has helped finance over 3 million housing units nationwide. But what does that mean for renters—and is it making a real impact? Let's explore.

What is the Low-Income Housing Tax Credit (LIHTC)?

The Low-Income Housing Tax Credit is a federal program administered by the Internal Revenue Service (IRS), designed to encourage private investment in affordable housing. Through LIHTC, investors receive tax credits in exchange for financing the construction or rehabilitation of low-income rental housing.

Developers who receive these credits must ensure a portion of their units remain affordable to individuals and families earning 60% or less of the area median income (AMI), typically for a minimum of 15 to 30 years.

How LIHTC Benefits Renters

1. Increased Availability of Affordable Housing

Perhaps the most direct impact of LIHTC on renters is the increased supply of affordable rental units. With federal subsidies dwindling, LIHTC has filled a critical gap, creating or preserving hundreds of thousands of apartments for low-income households.

2. Improved Housing Quality

LIHTC-financed properties are often newly built or significantly renovated, offering renters better living conditions than many non-subsidized low-income housing options. These units must meet local building codes and are subject to compliance monitoring, which helps maintain standards.

3. Greater Stability and Community Development

For families struggling to make ends meet, finding affordable rent can lead to greater stability. With rent typically capped at 30% of a household’s income, LIHTC housing makes it easier for tenants to budget and avoid housing insecurity. Over time, this stability supports education outcomes, employment retention, and stronger communities.

4. Long-Term Affordability

While some housing assistance programs offer short-term relief, LIHTC focuses on long-term affordability. In many cases, the affordable housing units remain income-restricted for up to 30 years, providing ongoing benefits for current and future renters.

Limitations and Challenges for Renters

While the impact of LIHTC on low-income renters is largely positive, it's not without challenges:

• Not all low-income renters qualify. Some extremely low-income individuals still struggle to afford LIHTC housing, as the rent levels may be too high without additional subsidies like Section 8.
• Geographic disparities. LIHTC developments often cluster in certain neighborhoods, potentially reinforcing economic segregation.
• Expiration of affordability periods. As compliance periods expire, some properties may convert to market-rate housing, reducing the available stock of affordable units.

The Bigger Picture: LIHTC and Housing Policy

The Low-Income Housing Tax Credit program is widely supported across political lines because it leverages private investment to meet a public need. However, advocates continue to call for:

• Increased funding and allocation caps
• Stronger incentives for deep-income targeting
• Extension of affordability periods
• Anti-displacement protections

These enhancements could significantly increase the positive impact on renters, particularly those in high-cost housing markets.

The LIHTC program remains one of the most effective tools in the U.S. to address the shortage of affordable rental housing. For renters, especially those living on modest incomes, it represents a critical lifeline—offering not only affordable rent but also a sense of stability and dignity.

As policymakers consider future changes to housing policy, expanding and improving the Low-Income Housing Tax Credit could be key to reducing homelessness, promoting economic mobility, and ensuring that every American has access to safe, affordable housing.