What Are LIHTC (Tax Credit) Apartments?
LIHTC apartments charge below-market rent because owners get a tax credit for keeping rents low. How they work, 9% vs 4%, and how rent is set.
Plain-Language Definition
LIHTC stands for Low-Income Housing Tax Credit. It’s a federal program under IRS Section 42 that gives apartment property owners a tax credit each year in exchange for keeping rents below market at some or all of the units.
Because the property owner gets a real tax benefit, they can charge less rent and still make the math work. That’s why LIHTC apartments exist, and why rent is capped.
Who Owns Them
LIHTC properties are privately owned, usually by a real estate developer or partnership. They’re not government-owned. That’s a key difference from public housing.
The state agency in Texas that allocates the credits is TDHCA (Texas Department of Housing and Community Affairs). TDHCA runs an annual competition (the Qualified Allocation Plan, or QAP) that decides which projects get credits.
9% vs 4% LIHTC
9% LIHTC is competitive and deep. Projects that win 9% credits can be built with less debt, so they can offer deeper affordability (30-60% AMI). Only a small share of applicants win in any given year.
4% LIHTC is non-competitive and pairs with tax-exempt bond financing. It’s less deep but more available, and often produces workforce (60-80% AMI) or mixed-income units.
You don’t need to know which type your specific community is; the practical rules for you as a tenant are similar.
How Rent Is Set
Rent at a LIHTC unit is capped by:
- The AMI tier of the unit (30/50/60/80%)
- The metro’s AMI figure that year
- The unit’s bedroom count (compliance assumes a household size for that bedroom count)
- The utility allowance (if you pay utilities, that’s subtracted from the max gross rent)
Your personal income doesn’t change this rent. You just have to be under the tier’s income cap at move-in.
What LIHTC Doesn’t Do
- Doesn’t move with you (unlike a Section 8 voucher, which is portable)
- Doesn’t set rent to a share of your income (unlike public housing)
- Doesn’t cover a set percent of your rent (unlike a voucher)
If you leave the LIHTC unit, you leave the below-market rent behind. It stays with the unit.
Related Reading
- LIHTC Apartments Hub (the main program page)
- How LIHTC Rent and AMI Limits Work
- LIHTC vs Section 8 vs Public Housing
