Low Income Housing Tax Credit (LIHTC)

The Low Income Housing Tax Credit Program (LIHTC) is a federally authorized program for non-profit and for-profit developers to promote the construction and rehabilitation of affordable rental housing.

The Low Income Housing Tax Credit (LIHTC) was created by Congress under Section 252 of the Tax Reform Act of 1986 to promote the construction and rehabilitation of housing for low income persons. The tax credit provides a means by which developers may raise capital for the construction or acquisition and substantial rehabilitation of housing for low income persons. Under the federal income tax code, investors in low income rental housing are permitted to take a credit against taxes owed the federal government. In Massachusetts, the Executive Office of Housing and Livable Communities (EOHLC) is the allocating agency for tax credits. EOHLC is responsible for preparing the annual allocation plan and making it available for review by interested members of the public before final publication. Because it depends on investor capital rather than just direct government subsidies, the LIHTC has imposed market discipline that results in long term stability for the projects. Investors assume significant risks and assert strict business discipline in selecting projects and overseeing their development and long-term operations.

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How it Works

Developers of affordable rental housing developments apply to EOHLC for tax credits. If they are awarded the credit, the developers (either for-profit or nonprofit) seek investors to help pay for the development of the housing. Intermediaries (known as syndicators) act as a bridge between investors and projects and often pool investors' money into equity funds. In exchange for providing development funds, the investors receive a stream of tax credits. Projects can qualify for two types of credits: a 9% credit, or a 4% credit.* Tax credits can be claimed by the investors for 10 years. For example, based on an investor willing to pay $.75/tax credit dollar, a project eligible for $500,000 in annual credits, would receive $3,750,000 ($500,000 in credit x 10 years x $.75) in equity.

* 4% tax credits are allocated by the MassHousing (formerly Massachusetts Housing Finance Agency) in conjunction with MassHousing's tax-exempt bond financing. The Massachusetts Development Finance Agency (MDFA) also allocates 4% tax credits in conjunction with tax-exempt bonds.

Who is Eligible

Both for-profit and nonprofit developers can qualify for the credit. At least 20% of the units must be reserved for persons with incomes at/or below 50% of the area median income adjusted for family size; or at least 40% of the units must be made affordable for persons with incomes at/or below 60% of the area median income adjusted for family size. In addition, the project must be retained as low-income housing for at least 30 years.

LIHTC Eligible Activities and Affordability Requirements

Tax credits can be used to support the acquisition and/or rehabilitation of existing structures for rental use, including distressed or failed properties, or the new construction of rental projects. Projects seeking tax credits must have a minimum of 8 tax credit-assisted units. The minimum term of affordability is thirty years.

All units receiving tax credit assistance must have 20% or more households earning no more than 50% of area median income or 40% or more households earning no more than 60% of the area median income. In addition, ten percent of the total units must be reserved for persons or families earning less than 30% of area median income. (Please see the additional program information below for a list of maximum rents and household incomes for your community.)

LIHTC Funding Limits

The maximum tax credit award for a new assisted living project is $500,000. The maximum for any other project is $1,000,000. However, EOHLC may elect to award more than $1 million in credit (up to a maximum of $1.3 million in credit) to large scale neighborhood impact projects. Requests for allocations greater than $1 million will be considered on a case-by-base basis if the sponsor is able to demonstrate the potential impact of the project and if EOHLC has sufficient credit to make a larger allocation. EOHLC expects that a sponsor receiving an award greater than $1 million (up to $1.3 million) will request reduced amounts of subsidy financing from the Office. The maximum eligible basis per unit in tax credit developments is $250,000 per assisted unit for projects within the Boston metro area and $200,000 per assisted unit for projects outside the Boston metro area. EOHLC will cap the allowable eligible basis in the preservation set-aside at $175,000 per assisted unit.

LIHTC Selection Criteria

  • Conformance with EOHLC Funding Priorities
  • Strength of overall concept
  • Strength of development team
  • Demonstrated need for project in the target neighborhood
  • Suitable site and design
  • Appropriate scope of rehabilitation or construction
  • Appropriate total development cost for properties included in proposal
  • Financial viability of the project
  • Degree of local support, including local funding commitments
  • Evidence of readiness to proceed
  • Evidence of satisfactory progress on projects previously funded with EOHLC resources
  • Incorporation of sustainable development

LIHTC - How to Apply

LIHTC Guidelines

Massachusetts State Low Income Housing Tax Credit Program Regulations

HUD's Difficult to Develop Areas - (In addition to 'HUD's Difficult to Develop Area' list, EOHLC has also designated additional Difficult to Develop Areas in the QAP).

Qualified Census Tracts

Metro Area List

EOHLC Proposed Income Averaging Guidance

LIHTC News and Updates

LIHTC Carryover Forms

LIHTC - Regulatory Related Documents

LIHTC - Massachusetts State Tax Credit Documents


For additional information please call the Low Income Housing Tax Credit staff at (617) 573-1300.

Contact   for Low Income Housing Tax Credit (LIHTC)


Please listen for phone menu options for EOHLC divisions

Kevin Connor, press secretary


Main Office
100 Cambridge St, Suite 300, Boston, MA 02114

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