Connect with us

Hi, what are you looking for?

Online Business Success

The Difference Between LIHTC And Section 8


Preston Byrd is a Real Estate Developer, Wealth Creator, Public Speaker and Managing Partner at Horizon Companies.

According to a study by the National Low Income Housing Coalition, there is a roughly 7.2-million shortage of affordable low-income housing in the U.S. And there are only 4.6 million homes that are available to rent. This means there is a shortage of more than 2 million homes in the marketplace that are available and even fewer of them are affordable.

The Low Income Housing Tax Credit Program (LIHTC) has been successful in creating and preserving affordable housing since 1986, but there is still a huge need for more investment dollars in this space, in my opinion. Private investors can help close the housing gap by investing in affordable housing developments, helping ensure that everyone has a place they can call home.

But one should not confuse the LIHTC program with the Housing Choice Voucher Program, also known as Section 8. The latter program offers assistance to very low-income families to buy decent, safe and sanitary housing, which can include single-family homes, townhomes and apartments, and is not limited to units located in subsidized housing projects. These vouchers are provided directly to the recipient and are used to supplement their rent.

On the other hand, the LIHTC program gives state and local LIHTC-allocating agencies about $8 billion annually “to issue tax credits for the acquisition, rehabilitation or new construction of rental housing” targeting households that are at 50% to 60% of the AMI. These federal tax credits that are allocated through the LIHTC program incentivize developers and corporate America to invest in building affordable housing.

Advertisement. Scroll to continue reading.

The stigma of slum-lords or low-quality housing that has been attached to Section 8 often carries over to the affordable housing program, which is very different. Investors in the multi-family housing space may be wary about investing in LIHTC properties out of fear of being associated with low-quality or unsafe housing. From my perspective, this unfortunate misnomer couldn’t be further from the truth. There are many affordable housing properties that are very competitive with market-rate developments and offer the same types of amenities as a market-rate property.

The core differences between the Section 8 program and the LIHTC programs are the intended uses of the allocations. While the Section 8 program is a government-funded program that provides voucher assistance directly to the recipient of a low-income household, the LIHTC allocations are made available to the states and issued directly to the development to offset construction cost, making it possible to reduce the rent amount for its targeted audience. The LIHTC program also engages corporations to participate in investing in the LIHTC program by incentivizing them with tax credit benefits.

Also, the Section 8 voucher payment standards vary by location and are based on the fair market rent for the specific area. The payment standard is the maximum amount of rent that the voucher will cover. It is worth noting that the minimum rent for a Section 8 voucher is $25 per month. However, there is no maximum rent for a Section 8 voucher, but the voucher will only cover up to the Payment Standard for the area. Within a LIHTC-funded development, the tenants are 100% responsible for the rental payments as it is not supplemented by the government.

Increased awareness of the LIHTC program and how it works is important to communicate to the broader investment community as it increases the conversations surrounding housing needs. These conversations make it more attractive for investors to put their money into the affordable housing space and help create more units of affordable housing.

The information provided here is not investment or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?

.



Source link

Advertisement. Scroll to continue reading.
Click to comment

Leave a Reply

Latest

Online Business Success

Finance Minsiter Miftah Ismail delivers the budget widening speech in the National Assembly on June 24, 2022. Screengrab Govt withdraws tax relief to salaried...

Top Stories

Bitcoin hit a 2022 low at $17,580 on June 18 and many traders are hopeful that this was the bottom, but (BTC) has been...

Top Stories

Chainalysis head of international policy Caroline Malcolm expects Australia’s new rules governing crypto advertising, promotion and consumer safeguards to follow a similar path to...

Top Stories

A YouTuber started traveling the world to see whether he could survive solely on Bitcoin as a means of payment. In the latest episode...

Technology

GamesBeat’s Rachel Kaser is furious about the Supreme Court’s failure to protect her rights and freedom. What’s the games industry gonna do?Read More

Top Stories

Ethereum’s native token, Ether (ETH), gained alongside riskier assets as investors assessed weak U.S. economic data and its potential to cool down rate hike...

Advertisement

You May Also Like

Uncategorized

Introductions get a lot of attention. I’ve explored the topic of how to write them even though as a reader, I always skip them....

Online Business Success

The internet is now our nervous system. We are constantly streaming and buying and watching and liking, our brains locked into the global information...

SEO Guide

There are all kinds of pictures of the world on the internet, but to find one of these specific pictures that you want to...

Online Business Success

You can think of link building in many ways. I like to call it tedious, painful, and a test of patience. It’s also necessary...

Advertisement