Which of the following is an essential factor in defining the applicable fraction?

The applicable fraction is a key concept in determining how much tax credit a property can receive under the Low-Income Housing Tax Credit (LIHTC) program. It essentially calculates the proportion of a property designated for affordable housing, based on the number of low-income units in relation to the total units available.

The percentage of low-income tenants is critical because it directly influences the overall tax credit calculation. A higher proportion of low-income units relative to the entire property will result in a higher applicable fraction, which increases the tax credits available to the developer. This relationship forms the backbone of how the LIHTC program encourages affordable housing development.

While other factors, such as total number of units or unit distribution by type, contribute to understanding a specific housing project, they do not define the applicable fraction in the same direct manner. The essence of the applicable fraction is fundamentally centered on the presence and proportion of low-income tenants, making that understanding essential for anyone operating within the realm of housing finance and tax credits.