Affordable housing finance
LIHTC
The Low-Income Housing Tax Credit (IRC § 42): ten years of federal credits sold to investors for equity, via competitive 9% or bond-paired 4% tracks.
Definition
The Low-Income Housing Tax Credit under IRC § 42 is the equity engine of U.S. affordable housing: the owner accepts income and rent restrictions and in exchange claims federal tax credits for ten years — credits sold to investors, converting a future tax stream into construction-period equity. Two tracks: the competitive 9% credit (~70% of qualified basis in present value), allocated from each state's ceiling, and the 4% credit (~30%), available as-of-right on projects financed with tax-exempt private activity bonds.
California administers both through CTCAC under the CTCAC regulations. Pub. L. 119-21 (2025) permanently raised the 9% ceiling about 12% and cut the bond-financing threshold for 4% deals to 25%.
Why it matters in an underwrite
Credit equity commonly funds a third to half of an affordable capital stack, so the underwrite starts with which track the deal can actually win: 9% rounds are oversubscribed lotteries; 4% deals queue for CDLAC bond volume cap. Taking the credits also means taking the tail — a 15-year federal compliance period with recapture exposure and, in California, a 55-year recorded use restriction that outlives every investor model.
Sources & related guides
See also
See the term in the law itself
Read the controlling text in the Code Library, or ask the AI how it applies to your project.
Last reviewed 2026-07-29. General information, not legal advice.