Investing in Low-Income Housing Tax Credits
For community banks that may be unfamiliar with the concept, the low-income housing tax credit (LIHTC) program makes federal tax credits available to owners of affordable rental properties. The credits owe their existence to the Tax Reform Act of 1986 and were intended to facilitate the development of low-income rental property. Since their inception, the program has been instrumental in the construction or rehabilitation of more than 1.6 million affordable housing units that otherwise might not have been built.
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How LIHTC Funds Can Help Banks Invest in Affordable Housing
More than 150,000 low-cost apartments leave the affordable housing inventory every year because of deterioration, rent increases, or abandonment. This loss of affordable housing takes a toll on low- and moderate-income families, challenges employers, and contributes to the destabilization of entire neighborhoods.
Fortunately, certain tools are available to banks and others that can help to stem this loss. Chief among these, low-income housing tax credits (LIHTCs) provide a significant means of financing the creation of new affordable apartments while simultaneously helping to stabilize neighborhoods by improving quality and supply. LIHTCs were responsible for about $7.5 billion of private investment in 2005, that will produce approximately 140,000 units with rents that stay within the reach of low- and moderate-income households for at least 30 years.
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