Evolution of LIHTC Legislation: Changes and Updates Over Time

Since its founding in 1986, the Low-Income Housing Tax Credit (LIHTC) Program has been significant in promoting affordable housing in America. Over time, it has undergone many legislative modifications to make it more efficient and responsive to emerging housing conditions. 

From the start to date, this blog details some of the significant legislative changes and updates regarding the LIHTC program.

 

1986: The Birth of LIHTC 

The LIHTC program was established by the Tax Reform Act of 1986 to encourage private investment in low-cost rentals. Over ten years, this program provided funds to property developers. 

As such, it became the leading U.S. public program through which affordable rental projects could be funded.

 

Early Adjustments and Enhancements (1987-2000) 

The LIHTC program underwent some refining and improvement modifications several years after its initiation. Measures to enhance distribution methods and improve visibility were introduced during the 1989 Omnibus Budget Reconciliation Act.  

In addition, it was raised from time to time so that an annual allocation of credits could expand its wealth, which increased the number and widened the influence of LIHTC-financed projects.

 

The 2000s: Addressing Economic Challenges through LIHTC 

Significant economic challenges affected affordable housing in the early 2000s. Many people’s lives, especially those living in low-income houses, were transformed from negative to positive with the 2008 Housing and Economic Recovery Act (HERA) because it integrated several crucial changes into the LIHTC program. 

This includes temporarily increasing housing credits by 10% while simultaneously introducing mechanisms that facilitate efficient distribution, among other things.  

The Housing and Economic Recovery Act also provided more funds for building more residential buildings, which again benefitted those who wanted durable and habitable homes, regardless of their financial situation.

 

2018: Consolidated Appropriations Act 

The LIHTC program has been further enhanced through the 2018 Consolidated Appropriations Act. This amendment increased annual LIHTC allocation by 12.5% over four years and set a permanent minimum credit rate of 4% for acquisition and bond-financed projects.  

Such measures were intended to stabilize and increase the program’s predictability, thus enabling continued investments in affordable housing.

 

Recent Legislative Changes (2020-2024) 

The most recent legislative alterations have made the LIHTC program more sophisticated and broad. The Tax Relief for American Families and Workers Act of 2024 included several essential modifications: 

1. Restoration of the 12.5% Allocation Increase: A temporary 12.5% increase in the LIHTC allocation for 2023-2025 nationwide was reinstated to address the increasing need for affordable housing. 
2. Reduction of the Bond Financing Threshold: This act lowered the bond financing threshold from 50% to 30% to facilitate additional affordable housing projects in 2024-2025, making it easier for developers to qualify for the 4% LIHTC. 
3. Enhanced Focus on Disaster Relief and Economic Support: In addition to changes affecting the low-income housing tax credit (LIHTC), the bill contained general tax breaks for regions that had been hit by catastrophe and provisions intended as incentives for entrepreneurs. All of these measures were aimed at ensuring stability in the economy and resilience in this sector.

 

Legislative Advocacy and Future Prospects 

Organizations such as the Affordable Housing Tax Credit Coalition played a key role in securing these provisions, which were achieved through advocacy activities. However, it is not yet a done deal because these fighters need further reforms. They want more backing given to those living at the poverty line while at the same time ensuring stable increments in LIHTC allocations that last a lifetime. 

The Tax Cuts and Jobs Act of 2017 is estimated to introduce new legislation. This could present an opportunity for broader changes in the LIHTC scheme, ensuring that it remains an effective instrument for spreading affordable housing all over America.

 

Conclusion 

Since its establishment in 1986, the LIHTC program has changed significantly. Through several legislative updates, it has adjusted itself accordingly to suit the varying demands of the market for affordable houses. 

The bail reform was the first notable measure taken in 2024 regarding recent changes. Alongside this, the threshold for bond financing was adjusted downward to reduce the required amount of bonds. These changes are critical milestones for the progress and improvement of LIHTC projects, so while advocacy work continues, it is anticipated that LIHTC will still be a fundamental pillar of U.S. federal housing policy because it attracts private funds into constructing low-income tenant dwellings. 

In the U.S., the long-term evolution of tax credits associated with low-income housing law has constantly been assassinated since it was first passed in 1986. This program has continually been improved and expanded through each act of legislation to ensure it helps more families gain access to affordable and high-quality shelter.