Low Income Housing Tax Credit: Helping Individuals with Disabilities Access Affordable Housing

Thursday, March 20th, 2014

Hello everyone! Welcome to our blog this week. We hoped you enjoyed last week’s discussion of Ron Suskind’s book, Life, Animated: A Story of Sidekicks, Heroes and Autism. Don’t forget to pick up your copy – it is being released on April 1st.

Today, we are going to switch gears for a little bit and focus on the financial aspect of what we do at M&L Special Needs Planning – and that includes providing information to families who are looking for ways to close any potential gaps between earned income and the costs of raising a family with special needs.

As special needs financial and life planners, we are constantly on the lookout for ways to help ease the financial burdens that can be associated with living with a disability. One of the places that every family must look for assistance is the government – both federal and state.

Although federal resources to help individuals with special needs can be scarce, and the process that accompanies receiving this help can be exhausting and competitive, there are still a few excellent federally funded programs that achieve exactly what they set out to achieve. Today’s blog will be devoted to one such program – the Low Income Housing Tax Credit Program, or the LIHTC.

What is the Low Income Housing Tax Credit Program (LIHTC), and how does it work?

According to the Department of Housing and Urban Development (HUD), the LIHTC program is “an indirect federal subsidy used to finance the development of affordable rental housing for low-income households.” This program, which was born from the Tax Reform Act of 1986, is intended to act as an alternate method of funding housing for low-to-moderate income households – it does this by providing incentives to developers for creating affordable housing.

Essentially, this is how it works:  the IRS allocates funds in the form of tax credits to each state in a dollar amount per person (click here to find the tax credits available for your state). The state then hands the subsidy over to a housing finance or other agency, which assumes responsibility for allocating the tax credits to private owners and developers. In order to receive these valuable tax credits (please click here for an explanation of the difference between a tax credit and a tax deduction), the housing developer has to commit to operating under rental and income restrictions and occupancy threshold requirements – in order words, the developer has to rent a percentage of units to individuals who fall under certain income levels, for a reduced (or restricted) rental fee.

How does the LIHTC Help Individuals with Disabilities?

The LIHTC program helps individuals with disabilities in a number of ways. To begin, it is well known in the special needs community that special needs housing is in crisis mode; there simply isn’t enough physical housing space to go around! The LIHTC address that lack of space by attempting to close the gap between accessible, affordable, AVAILABLE housing space and the long list of eligible individuals who want to live there. It does this by making the credits available only to developers who meet the eligibility requirements – quite simply, the rental restrictions and the occupancy threshold requirements ensure that there is rental space out there that is reserved solely for individuals with lower incomes. As individuals with disabilities tend to have lower incomes, this means that there is housing space available that is reserved for them.

Secondly, these tax credits are not only available to private housing developers; over the last few years, non-profit agencies have taken on the mantle of housing development and have use the developing fee to operate the housing, or to use as “seed money for additional housing development.”  For example, an excellent article on the LIHTC, published in the St. Louis Dispatch, describes how the housing agency in Missouri (the Missouri Housing Development Commission) has created a “special needs set-aside within the LIHTC so that more critically needed supported-housing options can be funded.” The article goes on to describe that the LIHTC has taken on a critically important role in creating housing for individuals with disabilities, as “there is no other significant resource available to non-profit service providers to create the housing so desperately needed by the people they serve.”

More Information?

If you would like more information on the LIHTC in your state, please visit the HUD webpage devoted to the topic, or check out this informative article published by the Danter Company. You may also wish to check out the National Council of State Housing Agencies for a housing agency in your state. If you would like to learn about how you may personally benefit from the LIHTC, or about housing options for individuals with disabilities in general, please do not hesitate to contact us – we are special needs community building experts, and are currently involved in several special needs community development projects. As well, you may wish to subscribe to our Independent Living Program and Housing Database, an online resource that contains more than 800 independent living programs from across the United States, as well as a wealth of special needs service providers, organizations, and advocacy groups.

Thanks so much for joining us today! We hoped we have provided you with some valuable information on an important tax credit program that significantly helps individuals with disabilities. Have a great Thursday – see you next week!

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