The Low-Income Housing Tax Credit (LIHTC) is a pivotal federal program. It was established under the Tax Reform Act of 1986. This program is designed to stimulate the development of affordable housing across the United States.

By granting developers tax credits, this initiative lowers the financial risks associated with building or refurbishing apartments for low- to moderate-income families. These credits can be used over a 10-year period, substantially offsetting the costs involved in maintaining lower rental rates.

For multifamily properties, the LIHTC provides a crucial incentive that encourages developers to invest in creating affordable units. Properties developed under this program must adhere to specific guidelines, often tied to the Area Median Income (AMI).

Housing Finance Authorities play a significant role in distributing these tax credits through a Qualified Allocation Plan (QAP). They ensure that the projects meet local housing needs and priorities.

The impact of LIHTC on rental housing is profound. It not only boosts the availability of affordable units, but also fosters economic diversity within communities.

As the competition for these tax credits is intense, developers must carefully craft proposals that align with stringent selection criteria. This ensures that multifamily housing developments genuinely contribute to both local and broader economic goals, promoting a sustainable approach to affordable housing.