Affordable housing finance
LIHTC rent limit
Maximum gross rent on a restricted unit: 30% of the imputed income limit for the bedroom count — with tenant-paid utilities counted inside the cap.
Definition
Under IRC § 42(g)(2), gross rent on a low-income unit may not exceed 30% of the imputed income limitation — the income limit for an assumed household of 1.5 persons per bedroom (one person for studios) at the unit's restriction level. Gross rent includes a utility allowance for tenant-paid utilities (per the § 1.42-10 regulations) and excludes federal rental assistance payments, so a Section 8 unit's total rent can exceed the limit while the tenant-paid share complies. Limits run off unit size, not the actual household: a family of five in a two-bedroom does not change the ceiling.
Why it matters in an underwrite
The ceiling is the lesser-of test in every revenue line: achievable market rent versus the limit. A 60% AMI two-bedroom ceiling keys off a three-person imputed household regardless of who moves in, and the utility allowance comes off the top before you collect a dollar — $100 of allowance is $1,200 a year of revenue per unit gone. Exceed the ceiling even briefly and the unit is noncompliant for the year: a standard Form 8823 category with credit consequences.
Sources & related guides
See also
See the term in the law itself
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Last reviewed 2026-07-29. General information, not legal advice.