The Low-Income Housing Tax Credit (LIHTC) is a complex but crucial tool for the production and preservation of affordable rental housing. Through this program, private investors receive a federal income tax credit as an incentive to make equity investments in affordable rental housing. Since 1986, nearly 3 million affordable housing units have been placed in service.n this report, we outline the basics of the LIHTC program, including how it works, the various partners involved, how financing is structured, how investors benefit from the program, and who lives in the LIHTC properties. We also highlight the successes of the program and examine the challenges it faces. This report is a companion to The Low-Income Housing Tax Credit: Past Achievements, Future Challenges (Scally, Gold, et al. 2018).

Financing and structuring a LIHTC deal requires several partners. In addition to federal, state, and often local government agencies, deals involve equity investors, who invest in a property in exchange for tax credits; attorneys, who navigate the legal process; and project developers or owners, who build and manage the property. Sometimes other housing funds (such as the HOME Investment Partnerships Program and the Community Development Block Grant program, both run though the US Department of Housing and Urban Development) are leveraged to finance projects. We need to know more about tenant characteristics. As of 2015, only 69 percent of LIHTC properties report data on tenant characteristics. Within those who report, response rates for certain questions vary. Only 80 percent of tenants from reporting properties respond to questions about income; only 68 percent report any data on race and ethnicity.