What is the 50% test for LIHTC?

The 20-50 test means that 20% or more of the units in the project are occupied by tenants whose income is 50% or less of the area median gross income. The test is met on a project-wide basis rather than on each building as is the basic requirement of IRC Sec.

What is the 50% test?

Under current law, if a developer finances 50 percent or more of a project with tax-exempt private activity bonds, the owner is generally eligible to claim tax credits that don’t impact an agency’s LIHTC volume cap.

What is a 9% LIHTC?

The 70 percent subsidy, or 9 percent tax credit, supports new construction without any additional federal subsidies. Rental properties that qualify for the LIHTC tend to have both lower debt service payments and lower vacancy rates than market-rate rental housing.

What is the LIHTC rate?

There are two separate rates — one for 70% present value credit (PVC) and one for the 30% present value credit. NOTE: the 70% rate is currently fixed by statute at 9%….Low-Income Housing Tax Credit Rates.

Is LIHTC a HUD program?

HUD collects LIHTC data at the property level and the tenant level. The LIHTC database, created by HUD and available to the public since 1997, contains information on 48,672 projects and 3.23 million housing units placed in service between 1987 and 2018.

What is 42m letter?

“42(m) Letter” shall mean the letter from the Authority to an Owner evidencing that a Project being financed with the proceeds of tax-exempt bonds satisfies the requirements of the QAP and Section 42(m)(1)D of the Code. “Allocation” shall mean the award of Tax Credits to a Project pursuant to Section 42.

How can I finance affordable housing?

Most affordable housing financing deals involve a mortgage, tax credits, and two or three other sources of money. It’s not uncommon, however, for developers to rely on upward of 20 financing sources as they try to fill the gap between what it costs to build affordable housing and the money they have available.

How do tax-exempt housing bonds work?

The IRS Code (Section 103) allows the purchasers of the bonds to deduct the interest income from the bonds from their federal gross income taxes. Thus the interest rate on tax- exempt bonds is lower than conventional bank financing (typically by about 2%), and these savings can promote housing affordability.

How does 9% LIHTC work?

Low-Income Housing Tax Credits, or LIHTCs, are used to either construct new rental buildings or renovate existing buildings. The 9% tax credit (70% subsidy) is usually for new construction and substantial rehabilitation without federal subsidies. Either tax credit can be claimed for up to 10 years.

How is LIHTC income limit calculated?

LIHTC rents are not determined by individual household incomes. Instead, income set asides (brackets) that are selected during the credit application and allocation process are used to determine the rents that can be charged and the households who are eligible for Section 42 housing.

How is the 4 LIHTC rate calculated?

The rates are calculated by backing into the present value of the 10 years worth of tax credits so that the present value of the tax credits is equal to 30% of a project’s eligible basis for the 4% credits or 70% of the project’s eligible basis for the 9% credits.

What is the current 4 LIHTC rate?

Legislation signed into law on December 27, 2020, fixed the rate for the 30% present value low-income housing tax credit (LIHTC), which had dropped to a historic low of 3.07 in 2020, at 4% (the 4% Floor).