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

The Low-Income Housing Tax Credit (LIHTC) is a federal financing tool created by Congress to encourage private developers and nonprofits to build and preserve rental housing affordable to low-income families and seniors. Rather than direct government grants, the program provides tax credits to developers who agree to keep units affordable for a set period, typically 30 years.

Here's how it works: state housing finance agencies, such as Texas Department of Housing and Community Affairs, allocate credits to qualifying projects based on need and development merit. Developers then sell or claim these credits to raise capital for construction or renovation costs. In exchange, they must rent units to households earning 50 to 60 percent of area median income (AMI) at below-market rates.

For renters, LIHTC-financed apartments mean stable, affordable housing in both urban and rural Texas communities. Units are legally restricted to serve low-income residents, protecting against rapid rent increases during the compliance period. Families can find LIHTC-funded properties through local housing providers and programs seeking to house working families, seniors, and people with special needs.

The program requires ongoing compliance monitoring to ensure affordability is maintained. Developers benefit from the tax credits, which offset their investment and make the projects financially viable even while serving renters with modest incomes.