LIHTC

Low-Income Housing Tax Credits (LIHTC) are a critical financing tool for affordable housing developments in the United States. Developers who are awarded LIHTC sell the credits to investors to generate equity for the project, covering up to 70% of development costs. In return, they commit to renting a percentage of units to low-income tenants at below-market rates for a minimum of 15 years.

Typical internal rate of return (IRR) for LIHTC projects is lower than market-rate developments, often between 7% and 12%. The application process is competitive, requiring expertise in compliance, financial structuring, and long-term asset management.