How does the LIHTC program contribute to housing affordability?

The Low-Income Housing Tax Credit (LIHTC) program contributes to housing affordability by ensuring lower borrowing costs for developers. This aspect is crucial because it incentivizes the construction and rehabilitation of affordable housing units. By providing tax credits that can be used to offset federal income tax liabilities, the program makes it financially feasible for developers to invest in properties that provide affordable rental options for low-income individuals and families.

When developers can secure lower borrowing costs due to the financial benefits from LIHTC, they can offer lower rents, making housing more accessible to those who might otherwise struggle to afford it. This mechanism ultimately helps to address the demand for affordable housing and encourages the development of properties that meet the needs of low-income communities.

In contrast, funding luxury housing development would not align with the purposes of the LIHTC program, as it specifically targets affordable housing solutions. Allowing tax credits to cover operational costs does not directly contribute to the development of new affordable units, while eliminating all property taxes would be an unrealistic and unsustainable measure that doesn’t focus on the essence of the program itself, which is to create incentives for building and maintaining affordable housing stock.