Unlocking Affordable Housing:
A Dive into Tax Credits and LIHTC Program


The Department of Housing and Urban Development (HUD) offers various incentives and programs to address housing challenges. Tax Credit programs such as the Low-Income Housing Tax Credit (LIHTC) stand out as crucial mechanisms for developing affordable housing units in the US. While these options are promising, it is very important for owners and investors to seek out an experienced tax credit consultant. Due to the number of regulations and requirements needed to achieve compliance, the application process can quickly become complicated. D3G is well-versed in tax credits, making us a perfect partner for clients looking to utilize state tax credits to provide quality affordable housing.

How It Works:

LIHTC is designed to subsidize either 30 percent or 70 percent of the low-income unit costs in a project. The 30 percent subsidy, known as the automatic 4 percent tax credit, covers new construction that uses additional subsidies or the acquisition cost of existing buildings. The 70 percent subsidy, or 9 percent tax credit, supports new construction without any additional federal subsidies. The LIHTC program aims to stimulate private investment in affordable housing while leveraging market forces to expand the availability of safe and accessible housing for underserved communities.


4% Tax Credits vs. 9% Tax Credits:

The difference between the 4% and 9% tax credit boils down to allocation and utilization. The 9% tax credit is more competitive due to its higher credit rate, resulting in a more significant dollar-for-dollar reduction in federal income tax liability for developers. Conversely, the 4% tax credit is typically paired with tax-exempt bond financing, offering a more stable and predictable funding source for affordable housing projects.


Incorporating The IRA and GRRP:

Within the Low-Income Housing Tax Credit (LIHTC) framework, the Inflation Reduction Act (IRA), along with the Green Resilient and Retrofit (GRRP) program, offer supplementary incentives, enhancing the likelihood of securing tax credits. Elements within the IRA, such as the Energy Efficient Home Credit (45L) and the Energy Efficient Commercial Building Deduction (179D), target affordable housing. Additionally, the GRRP program assists in securing funding for updating current housing units with more energy-efficient and ‘green’ appliances and fixtures.


Architectural & Cost Review:

Navigating the intricacies of Tax Credits requires a comprehensive architectural and cost review process. Developers must demonstrate adherence to building code requirements, accessibility requirements, state QAP requirements, and various lending protocols such as state-specific LIHTC. D3G’s team of Registered Architects and Project Managers have spent many years in the due diligence space, experiencing growth and change in the market over time. By integrating our departments, our AEC team can also proactively assess potential environmental and energy impacts, extracting valuable insights early in the review process.


In conclusion, the LIHTC program represents a powerful tool for creating housing solutions. These financial incentives, paired with sustainable design and cost-effective strategies, can significantly improve access to safe and affordable housing. The collaborative efforts of government agencies, owners, developers, and stakeholders are vital in addressing the pressing housing needs of communities nationwide.