The Low Income Housing Tax Credit (LIHTC) issues substantial tax credits to multifamily housing builders and owners as an incentive to acquire, rehabilitate, or construct rental housing for lower-income households. Funding for LIHTC tends to be more abundant than other programs, making it one of the most important resources for creating affordable housing. Since the program began in 1987, it has financed nearly 3.9 million housing units, and it accounts for a large share of all newly built affordable rental housing in the U.S.
Of those low-income LIHTC units, only about 16% are designated specifically for senior living. However, seniors also live in units that aren’t senior-designated. Across all LIHTC units, both senior-designated and not, roughly 30% of residents are 62 or older.
LIHTC Is Not Just for Seniors
Although the LIHTC program isn’t senior-only, some properties set aside units specifically for senior households. A senior-designated LIHTC community generally has an age requirement, usually 55 but sometimes as high as 62. LIHTC communities typically mix non-subsidized, conventional-pay units with low-income units, and the community owner generally decides how many units to set aside for low income and what the maximum income level is for those units.
Is Rent at an LIHTC Apartment Based on Income?
Unlike other programs, rent for a LIHTC unit isn’t based on the household’s actual income. Instead, rent is based on two main factors: the number of bedrooms in the unit and the income bracket (income limit) assigned to that unit. When property owners participate in LIHTC, they set aside a promised number of units for certain income brackets.
An income bracket is determined by establishing the average income for a particular area, known as the Area Median Income (AMI), and placing households into percentage brackets based on what share of that average income they earn. For example, if the area’s median income were $2,000 a month and a household earned $2,000 a month, they’d fall in the 100% bracket. If another household in that area earned $1,000 a month, they’d fall in the 50% bracket. You can find current AMI figures by area on HUD’s income limits portal.
How Are LIHTC Household Sizes Determined?
Household income “averages” are determined by household size, since a larger household typically generates more combined income than a smaller one. It’s the median income for a specific household size that gets used to set rent amounts.
LIHTC rental units don’t use the actual number of people living in the unit to establish rent. Instead, they designate a fixed household size based on the number of bedrooms, generally 1.5 people per bedroom. A one-bedroom unit is designated as a 1.5-person household income level, even if the actual household is a different size. That doesn’t mean one and a half people need to live in the unit; it’s simply used to establish the appropriate rent for that size of unit. A two-bedroom unit is designated as a 3-person household, with rent based on the area’s median income for a 3-person household. The bigger the unit, the bigger the designated household, which generally means a higher qualifying income limit and a higher rent. These figures are based entirely on area averages rather than the actual household size or income. Once a unit is assigned an income bracket, rent is set according to the number of bedrooms.
A tenant’s income generally can’t exceed the unit’s bracket. For example, a household earning 55% of the area’s average for a unit’s designated household size wouldn’t be eligible for a unit set at the 50% bracket, but would be eligible for a 60% bracket unit. If that unit has two bedrooms, the household’s income cap would be based on 60% of the area’s median income for a three-person household.
How Is Rent at a Low-Income Housing Tax Credit Unit Established?
Rent is typically set at 30% of the unit’s bracketed monthly income for its designated household size. That’s easier to follow with an example:
Let’s Look at a Hypothetical Example
Sally is 72, and her adult daughter plans to live with her to help with her care. They tour a few LIHTC communities in their area and find a two-bedroom unit they like. Here are the unit’s details:
- Unit’s set income bracket: 50% (their combined income generally needs to stay below this level)
- Unit’s number of bedrooms: 2
- Unit’s set household size: 3 (based on bedroom count, not the actual number of people)
- Area’s median income for a 3-person household: $60,000 (a round figure used for illustration; actual figures vary by area and year)
Here’s the math:
- 50% (unit’s bracket) × $60,000 (median income) = $30,000 (max annual income the household can earn)
- $30,000 (annual income) ÷ 12 (months) = $2,500 (max monthly income the household can earn)
- Base rent: 30% of $2,500 = $750 a month
On top of base rent, the unit typically includes a utility charge added to the rent, and this can sometimes be substantial. The utility allowance is a set amount based on the unit’s estimated usage. Base rent plus the utility allowance is called Gross Rent. Tenants generally don’t have the option to pay base rent alone, and property owners typically don’t disclose the base rent separately. What’s charged to the tenant is the gross rent, which includes the unit’s utility costs.
Does Rent Increase at an LIHTC Unit if Income Increases?
Unlike other low-income senior housing programs, once rent is set for an LIHTC unit, there’s generally nothing a tenant can do to change it. Unlike the Section 202 Supportive Elderly Housing Program or the Housing Choice Voucher Program, there’s typically no penalty if a household’s income increases, and rent doesn’t rise as a result. Rent also doesn’t decrease if a household earns less. That said, since eligibility is generally reevaluated each year, a household that earns more than the unit’s income bracket may no longer be eligible for that specific unit. If that happens, a larger unit may be offered if one is available; if not, the household may need to pay full market rent to stay.
One advantage of Low-Income Housing Tax Credit senior apartments is that they tend to be easier to apply for than some other HUD programs. Aside from income verification, applying for a LIHTC unit isn’t much different from applying for any other rental. A tenant generally selects a community with LIHTC units and applies directly through the community’s office.
Tenants can also combine LIHTC with HUD’s Housing Choice Voucher (HCV) program, which can reduce the rent amount by the value of the voucher, sometimes leading to substantial savings. To obtain a voucher, a tenant generally needs to apply and qualify with the local Public Housing Authority (PHA) during the HCV program’s open enrollment.
While the LIHTC program is more widely available and often easier to access, there are a few things worth considering when a senior is looking for an apartment. It’s worth checking that the community is close to necessary amenities like doctors and grocery stores, and confirming that public transportation nearby is accessible and reasonably priced if the senior doesn’t drive. It’s also worth understanding what kind of support system tends to be available once the senior moves in. Because LIHTC communities don’t have a dedicated Service Coordinator the way Section 202 communities do, having a network of caring people nearby can make a meaningful difference.
Low-Income Housing Tax Credit apartments can be a great option for seniors who need to find housing quickly. For more on other options, see our How to Find Low-Income Senior Housing guide.
If you’re interested in finding a list of LIHTC senior apartments near you, visit HUD’s LIHTC Property Data search page.
How Senioridy Can Help You Find Affordable Senior Housing
You can also browse the Senioridy directory to search for low-income senior housing options near you.
And if subsidized housing isn’t the right fit, or a loved one would rather stay in their own home, Senioridy’s in-home care directory can help families find in-home care providers, from personal care aides to skilled home health services.
This article is for informational purposes only and does not constitute legal, financial, or medical advice. Housing program availability, income limits, and eligibility rules are subject to change. For free, personalized housing counseling, contact your local Area Agency on Aging through the Eldercare Locator or a HUD-approved housing counselor. Always confirm current requirements with official program representatives.