Enacted under the Tax Reform Act of 1986, the Low Income Housing Tax Credit (LIHTC) Program is the largest source of subsidized construction for low-income housing in U.S. history. The program provides dollar-for-dollar tax credits to owners and developers of properties, who then lease a certain portion of their units to low-income households at reduced rent prices. Owners can rent the remaining portion of the units at market-rate prices, often leading to mixed-income housing developments. 

Undoubtedly, LIHTC has been instrumental in increasing the construction of affordable housing across the United States. Not only does it provide funding for new affordable housing developments, but it also aims to reduce concentrated poverty in government-subsidized housing. This is made possible as LIHTC properties are located throughout high-, middle-, and low-income neighborhoods, fostering mixed-income communities. 

In the context of Los Angeles County, LIHTC has been a significant contributor to developing new affordable housing for residents, playing  a crucial role in combating the homelessness and housing crisis. However, from 2020 to 2021, the production and preservation of LIHTC units decreased by 26% throughout LA County. Despite this decrease, renters in Los Angeles County currently need to earn three times the City of Los Angeles minimum wage to afford the average monthly market rate rent, according to an Affordable Housing Needs Report released by the California Housing Partnership. 

In addition to the federal LIHTC, California has its own Low Income Housing Tax Credit Program, which supplements the federal credits to further incentivize the development of affordable housing within the state. This state program helps bridge the funding gap, ensuring that more projects can be completed and providing additional support for mixed-income developments.

Written by Xavier Ramirez