Blogs| Tennessee Low-Income Housing Tax Credit (LIHTC) Program
Written by
Sajan Sharma
Published
Dec 23, 2024
Topics
State LIHTC
The Tennessee Low-Income Housing Tax Credit (LIHTC) Program is important to serve the growing demand for affordable housing in the state. The program provides developers with federal tax incentives to establish and maintain rental housing for low—to moderate-income families. To balance affordability with quality, the program builds vibrant communities and addresses housing challenges in Tennessee’s urban, suburban, and rural areas.
Administered by the Tennessee Housing Development Agency, LIHTC is a collaborative federal, state, and local undertaking that aims to make housing more accessible and affordable for all.
Tennessee’s LIHTC program aims to encourage developers while keeping housing affordable for generations to come. Here are the most prominent features of its LIHTC program:
The THDA annually allocates tax credits to developers based on a competitive bid process. It ensures that the program prioritizes regional housing needs and focuses on projects that benefit underserved populations or energy-efficient designs.
The LIHTC properties guarantee that the homes’ prices will remain affordable to residents for at least 30 years. Because rent limits are further decided based on Area Median Income, low-income families can afford houses throughout the state.
This would make the program fully possible by pairing it with a local incentive, such as a reduction in property tax burden—Payments in Lieu of Taxes (PILOTs)—to make the projects feasible.
LIHTC properties house various tenants, from the elderly and veterans to those with disabilities. This fosters inclusivity across the state.
While transformative, developers face several challenges standing in the way of further progress:
Tennessee’s technique of adding LIHTC value into the actual property tax assessment renders these developments more financially unappealing. Such valuation increases costs and deters developers from engaging in affordable housing projects.
Large up-front investments in infrastructure, such as the extension of water and sewer lines, will often be necessary to develop affordable housing in rural Tennessee. These add substantially to the costs of projects.
Stringent zoning laws and community resistance in suburban areas are among the most potent hurdles in delaying or blocking affordable housing developments, again because of misconceptions about the impact on property values and neighborhood character.
Developers in rural and suburban areas have limited access to LIHTC funding options, which makes launching or sustaining affordable housing challenging.
In rapidly growing cities like Clarksville and Chattanooga, workforces face a deficit in affordable housing, thereby challenging LIHTC, especially regional economic growth.
LIHTC benefits the communities of Tennessee by building support for regional growth, economic growth, social stability, and neighborhood revivals.
Affordable housing projects boost the economies of their neighborhoods through employment, property value increment, and influx of businesses. In Davidson County, for instance, millions have been raised in PILOT agreements into the neighborhood from investments.
Affordable housing reduces housing insecurity and homelessness and creates an inclusive society. Projects such as Tullahoma Village show how the program can reshape unsightly neighborhoods into lively, safe places.
LIHTC developments upgrade existing housing, reducing concentrations of poverty and creating mixed-income communities. Renovations in Memphis and Knoxville demonstrate how these projects help revitalize neighborhoods.
The program stabilizes housing for low-income families, reducing the burden on emergency services and saving public dollars while enhancing the quality of life for residents.
Every region of Tennessee has specific opportunities and challenges regarding housing. LIHTC is affecting the state as a whole in the following ways:
With rising housing costs, Nashville is becoming critical of affordable housing. The city has over 4,000 units of affordable housing available to low—and moderate-income families through MDHA’s LIHTC and PILOT programs.
Memphis concentrates on redeveloping its older housing stock with LIHTC. These developments offer affordable and safe homes while upgrading the infrastructure and making the communities more appealing.
LIHTC develops Knoxville’s varied housing options, including income-based apartments and workforce housing. The city’s innovative methods allow it to retain affordability without degrading the quality of life.
In rural communities, where the availability of housing is scarce, PILOT agreements and LIHTC financing attract developers to the table. Indeed, counties like Dickson can be displayed as examples of how partnerships may successfully bridge financial and infrastructure hurdles in a project.
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Tennessee must confront the existing challenges and seize every new opportunity to make the most of LIHTC. Here’s how:
If an income-based valuation method is adopted for LIHTC properties, Tennessee would follow best practices, making the developments more attractive to investors.
Encouraging more counties to enter into PILOT agreements could promote affordable housing development in underserved areas, especially in rural areas.
Collaboration with local governments, developers, and nonprofits would facilitate the development of housing projects and promote innovative ideas to address affordable housing challenges.
This will help lower resistance in the community as people become more aware of the benefits such affordable housing will bring to their respective places.
The Tennessee Low-Income Housing Tax Credit program has been at the core of Tennessee’s efforts to solve its housing problems. The synthesis of federal tax credits, local incentives, and strategic partnerships provided by this program delivered impactful solutions throughout urban and rural areas of the state.
From Affordable Housing in Nashville, Tennessee, to Low-Income Apartments in Knoxville, Tennessee, the LIHTC program shows exactly how collaboration builds stable, inclusive communities.
Continued momentum in reform and innovation will guarantee that affordable housing remains firmly prioritized for generations to come.
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