How are tax credits typically allocated to projects under the LIHTC program?

Under the Low-Income Housing Tax Credit (LIHTC) program, tax credits are allocated to projects through a competitive process that is outlined in each state's Qualified Allocation Plan (QAP). The QAP establishes the criteria and priorities for awarding tax credits, ensuring that the allocation process is transparent and aligned with state housing needs.

This competitive process encourages developers to submit proposals that meet specific goals, such as serving the lowest-income tenants or ensuring that projects are built in areas with high demand for affordable housing. By utilizing the QAP, states can prioritize projects that best fit their local housing market and community needs, thereby maximizing the impact of the tax credits in addressing affordable housing shortages.

Other approaches, such as equally distributing credits among applicants or using a first-come, first-served basis, do not consider the specific housing needs of the community and can lead to less effective use of resources. Allocation at the discretion of the governor could also lead to a lack of consistency and fairness in the distribution process.