North Carolina Low-Income Housing Tax Credit (LIHTC) Program

The North Carolina Low-Income Housing Tax Credit (LIHTC) Program is the state’s primary instrument for promoting affordable housing, addressing a critical need among low-income families, seniors, veterans, and individuals with disabilities.

  

Since 1987, the North Carolina Housing Finance Agency (NCHFA) has administered the LIHTC to incentivize private investment, creating a sustainable model that has generated extensive social and economic benefits across North Carolina. 

 

This resource outlines the program’s structure, impact, preservation efforts, and legislative support to highlight its central role in alleviating housing challenges statewide. 

The North Carolina LIHTC program: An overview 

Since its inception, the North Carolina LIHTC Program has helped address housing affordability and stability by financing more than 109,000 affordable units on 2,530 properties. North Carolina’s LIHTC is a model for federal LIHTC and is supposed to be a public-private partnership, using private investments to address the state’s pressing housing needs. 

 

NCHFA programs require long-term affordability agreements, with projects usually committed to a 30-year affordability period . The agency provides tax credits each year to developers who construct or rehabilitate affordable housing through a competitive application process that favors developments aligned with the state’s Qualified Allocation Plan (QAP) priorities. 

Economic and Social Impact of North Carolina LIHTC Program  

North Carolina’s LIHTC Program contributes significantly to its local economies and overall state growth. LIHTC projects have created over 223,000 jobs, $20 billion in wages and business income, and $1.2 billion in state and local government tax revenue. Additionally, LIHTC-funded properties must set aside a portion of units for Targeted Programs (10-20% of units) to serve persons with disabilities, often in collaboration with local support services. This effectively reduces healthcare costs and improves residents’ quality of life .

 

Affordable housing developments have been shown to improve residents’ educational and health outcomes by providing stable environments where families are less likely to face overcrowded or unsafe housing. Specifically, research has linked stable housing with better educational continuity for children and improved health outcomes for families, who can allocate more income to healthcare and nutrition when housing costs are reduced. 

North Carolina Affordable Housing Gap 

There are 623,000 low-income renters in North Carolina, most of whom face a high housing cost burden; some pay more than 30% of their income for rent. LIHTC will help alleviate such burdens through affordable rental options because a minimum wage worker in the state earns $7.25 per hour, far from the wage required to afford a modest two-bedroom apartment at fair market rates . 

 

In North Carolina, LIHTC developments target high-opportunity areas to encourage community integration by offering affordable housing in neighborhoods with high-quality schools, healthcare facilities, and employment opportunities. This is one strategy that fights socioeconomic disparities as North Carolina’s population increases, bringing pressure to urban areas to meet the increased housing demand and gentrification.  

Structure and Eligibility of the North Carolina LIHTC Program 

North Carolina’s LIHTC Program is structured to offer both 4% and 9% tax credits, with funding allocated based on specific project criteria outlined in the QAP. The Qualified Allocation Plan (QAP) assesses projects on location, financial viability, development quality, and alignment with local housing needs. Projects are categorized for urban and rural allocations, with additional points awarded for developments in underserved areas that address specific needs, such as housing for seniors or individuals with disabilities.

 

The Workforce Housing Loan Program (WHLP) is a key state-level funding initiative that complements LIHTC in areas where affordable housing developments would otherwise be financially unfeasible. Since 2015, WHLP has supported over 2,700 affordable units in rural areas, helping to ensure that LIHTC developments reach communities where lower rents might deter typical private investment . 

Preservation and Recapitalization to Extend Affordability in North Carolina  

The affordability of the existing LIHTC-funded units must be preserved because many properties are reaching the end of their 30-year affordability term. North Carolina has adopted preservation strategies, including setting aside 10% of tax credits for rehabilitation and recapitalization, as 15,600 units are at risk of losing affordability by 2031. These measures extend the life and affordability of properties, especially in high-demand urban areas at risk of transitioning to market-rate housing.

  

Moreover, since 2007, 4,300 affordable units across 71 properties have been recapitalized with new allocations of tax credits, ensuring long-term affordability and sustainability. This approach benefits communities by maintaining housing options for low-income households while reducing the need for costly new construction.  

Legislative Support and Policy Initiatives 

North Carolina’s LIHTC program benefits from state-supported initiatives like the WHLP, which maximizes the impact of LIHTC developments in economically disadvantaged areas. In tandem with the Workforce Housing Loan Program, the state has advocated for policies that limit the Qualified Contract process, an early exit option that could otherwise allow owners to transition properties out of affordability restrictions.

  

The Housing Trust Fund also supports LIHTC initiatives by providing gap financing for affordable housing projects. Through these programs, North Carolina ensures that affordable housing can be sustainably developed and maintained in diverse markets, from urban centers to rural areas. 

The Role of LIHTC in the Housing Landscape of North Carolina 

It has been an essential method through which the state manages its affordable housing needs. LIHTC Program can offer a comprehensive remedy for high housing costs and limited access to adequate, affordable units. 

 

LIHTC incentivizes private investments that help ensure long-term affordability, providing much-needed housing stability to thousands of North Carolinians.

  

With the increased demand for low-cost housing, ongoing investments in LIHTC and complementary programs will be essential in ensuring affordable housing security for low—and moderate-income families across the state.