What is the significance of the "30% test" in determining tenant eligibility?

The significance of the "30% test" lies in its role in ensuring that a significant percentage of units in a Low-Income Housing Tax Credit (LIHTC) property are accessible to eligible tenants. Specifically, this test mandates that at least 30% of the units are rented to tenants whose incomes do not exceed 60% of the Area Median Income (AMI). This requirement is a crucial component of the LIHTC program, aimed at promoting affordability and accessibility within the housing market for low-income individuals and families.

In this context, achieving the 30% threshold demonstrates a commitment to providing housing for those most in need, thereby contributing to the broader objectives of the LIHTC initiative, which seeks to alleviate housing shortages and foster mixed-income communities. This requirement also helps maintain compliance with federal guidelines associated with the LIHTC program, ensuring properties continue to qualify for the associated tax credits. As a result, it plays a critical role in supporting affordable housing development and addressing housing inequality.