Low Income Housing Tax Credits Program

Capital and Asset Management

The Low Income Housing Tax Credits (LIHTC) Program was enacted in 1986 to provide the private market with greater incentives to invest in affordable rental housing. Federal housing tax credits are awarded to developers of qualified projects who then sell these credits to investors to raise capital (or equity) for their projects. As a result, a tax credit property can offer lower, more affordable rents. The IRS allocates housing tax credits to designated state agencies – typically state housing finance agencies – which, in turn, award the credits to developers of qualified projects. Each state is limited to a total annual housing tax credit allocation of $1.75 per resident.

The LIHTC Program provides a viable source of economic development that could be used to benefit tribal communities. However, as allocations pass through state agencies and are based on population, as opposed to need, there is no incentive or regulation requiring state agencies to consider tribal projects in their qualified allocation plans (QAP), which are approved annually by the Internal Revenue Service. In fact, the incentive structure is often contrary to serving tribes, as states often seek to prioritize their own state-run housing program objectives before considering tribally-run housing programs. As tribes have the highest housing occupancy rate of any demographic and some of the longest waiting lists for public housing in the nation, it is imperative that the IRS or Congress make changes to the program in a way that compels states to, at the very least, consider the needs of tribes within their boundaries in their housing plans. To improve the chances of tribal applicants receiving LIHTC allocations, significant changes must be made.

To meet the housing needs of Indian Country, NAFOA is encouraging the IRS to ensure that tribal needs are included for any state with a tribal population. A simple fix would mandate tribal consideration on QAPs. The LIHTC program is one of the largest federal tax credit programs, which should result in tribes receiving a sizable direct credit allocation. NAFOA believes it is imperative that the IRS or Congress make changes to the program in a way that compels states to consider and meet the needs of tribes within their boundaries in their housing plans.

Current Status and Action:

NAFOA has worked with the Senate Committee on Finance and the Senate Banking Committee to increase tribal government access to one of the nation’s largest tax credits – the Low Income Housing Tax Credit Program. Currently, NAFOA has been successful in adding language to a pending housing bill that requires states to include Indian housing needs in their qualified allocation plans. This is an important step in ensuring tribal governments are included and receiving their fair share of credits.