Blogs| Maryland Low-Income Housing Tax Credit (LIHTC) Program
Written by
Priya Gupta
Published
Oct 15, 2024
Topics
State LIHTC
LIHTC has transformed the housing scenario in Maryland in terms of quality, quantity, and even prices as an efficient solution for affordable housing development and preservation either when searching for affordable living options as a tenant, when seeking tax incentives to create these housing units as a developer, or when using such policies as an initiative to meet the immense demand for housing within the state as a policymaker.
This article will demystify the LIHTC program, its benefits, and why supporting and expanding this initiative is more important than ever.
The Low-Income Housing Tax Credit program in Maryland aims to promote affordable rental housing for low-income families through the creation and preservation of affordable rental housing. It is one means of making financially attractive low-income rental units possible, as it offers tax credits to developers, thereby focusing on multifamily rental housing, either newly built or as a rehabilitated existing building.
LIHTC fills the gap for tenants who cannot afford a safe, decent, and cost-effective home to live in Maryland. Usually, qualified tenants come from an income level of 60% of the Area Median Income, ensuring that low-income families, seniors, or individuals will be assured of decent, safe, and sanitary housing.
To them, the program provides a secure tenancy structure for affordable houses whose rent is set on their income rather than the market rate. This means that the tenants are free from the fear of being priced out of their homes.
The financial advantage that the LIHTC program provides to developers is quite high. The LIHTC program grants tax credits to developers, which reduce their federal tax liabilities, so the affordable housing projects are really much more attractive.
Apart from this, developers can also opt for credits under Maryland’s Qualified Allocation Plan (QAP), which enumerates the state’s priorities regarding the development of affordable housing. These considerations also involve matters like location, community impact, and sustainability.
For developers, the application process becomes competitive but very rewarding. Maryland’s LIHTC program is structured to ensure that projects that alleviate serious and pressing needs in housing, such as those in deprived areas or those directed at specific vulnerable populations, receive primary attention. The process requires elaborate project proposals, and if successful, developers can enjoy tax incentives both from the state and federal levels.
A milestone in much affordable housing is Maryland’s allocation of $32 million in LIHTC and State Rental Housing Funds in 2022. The funds will be allocated towards supporting 15 affordable housing projects, which will either create or preserve more than 1,340 units. The projects are spread all over the state, ensuring that there’s a boost in the access levels towards affordable housing in both urban and rural areas.
This cash injection opens up more affordable housing stock units for tenancies, increasing the tenants’ chances of occupying safe and affordable homes. This reduces the tension of fighting over limited housing as families, seniors, and individuals are assured of a relatively stable living space.
This will make it easier for developers to meet new criteria in this area while enriching their portfolio to attract new generations of tenancies.
The 2022 funding allocations also brought new changes in the application and award process. Modifications to this process increase transparency and will make more developers qualify for credits to take the program. These credits that developers will now possess can go about their projects more easily, wherein more development timelines and completed units are seen within a much shorter period.
Beyond providing affordable housing, the LIHTC program offers tenants a great deal – peace of mind, stability, and opportunity. Here is how:
The LIHTC program assures that all tenants have their rent set according to a complex formula that leverages a tenant’s income to mostly no more than 30% of their monthly income, thereby ensuring that low-income families have a place to live in safety and stability without market rate hikes in rent siphoning up money that would otherwise be used for health care or education.
Tenants get long-term leases that focus on affordability for longer periods, 15-30 years in most cases. This ensures that family members will not experience displacement due to the market’s peak trend. The familiarity creates greater emotional and financial stability for families.
LIHTC housing is expected to meet federal and state requirements regarding safety, maintenance, and quality. Tenants can be assured that the housing is regularly inspected, repaired, and maintained to ensure healthy and safe living conditions.
Other than these, the RTC of Maryland helps qualified renters through rent reimbursement in return for paying back the renters based on the income and rent paid. This way, low-income tenants cut down their total housing expenses and subsequently make it useful for seniors and large families who face very high living costs.
Through the Maryland Department of Housing and Community Development (DHCD), the tenancy is streamlined since tenants can find and apply for openings in available LIHTC properties. This way, finding affordable quality shelter is not hassle-some. It is one sure way that low-income residents can gain access to clean homes without bureaucratic hassles.
The LIHTC program will provide more than an opportunity to develop affordable housing for developers but rather a chance to forever change communities in Maryland.
It is unique because it offers a combination of federal tax credits, State Rental Housing Funds, and other incentives such as Tax Increment Financing (TIF) and Community Development Block Grants (CDBG).
Such financial benefits help overcome the costs of construction and development, enabling developers to focus more on good housing solutions.
Applicants must go through a detailed, highly competitive application process to win LIHTC allocations. An emphasis is placed on projects filling critical needs—projects located in high-demand areas or projects that service populations of low-income, aged, and disabled persons. Developers must also report their compliance performance for the life of the project, including the time units remain affordable and the properties are well maintained. It’s not merely offering incentives but also a long-term partnership between developers, communities, and the state to address the need for affordable housing in Maryland.
Affordable housing projects in Maryland are found to face special challenges in rural Garrett County. Poor infrastructure, strict zoning laws, and smaller populations may discourage developers from investing. Thus, high costs are incurred, and the process becomes involved, making affordable housing less achievable for rural communities.
However, the state of Maryland has come forward to ensure this reduction in such barriers. Incentives such as tax increment financing (TIF) and community development block grants (CDBG) are available to developers who want to invest in rural housing projects. The local governments offer support through the simplification of zoning processes and essentials such as infrastructure.
In the future, the LIHTC program in Maryland will boom because the demand for affordable housing in the state is on the rise. The Affordable Housing Credit Improvement Act is set to increase funding and implement strong multifamily Housing Bonds that are crucial for funding LIHTC projects. These updates will allow developers to maintain both urban and rural communities’ housing needs.
The Maryland Low-Income Housing Tax Credit program is a magnificent tool for the government to tackle its affordable housing crisis. It presents real, material benefits to the tenant, such as the availability of affordable, quality housing and financial incentives to the developer to create such units.
As the program continues to expand and grow, it remains one of the bases of Maryland’s effort to meet the rising need for affordable housing, from the residents to the local economies.
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