How LIHTC Works
The Low-Income Housing Tax Credit (LIHTC) is the nation’s largest and most successful tool for encouraging private investment in the production and preservation of affordable rental housing.
It has been an essential element in Cinnaire’s affordable housing toolkit since our founding. For us, it’s not just about closing the deal with developers. We partner with local leaders, tapping into the “wisdom of the community,” to develop the most innovative housing ideas and the most powerful service solutions. Cinnaire’s team of industry experts help to structure a deal using LIHTC, troubleshooting programs and addressing issues as they arise. Our asset management and fund management staff then provide detailed and analytic reporting to investors.
How LIHTC Works
The LIHTC gives investors a dollar-for-dollar reduction in their federal tax liability in exchange for providing financing to develop affordable rental housing. Investors’ equity contribution subsidizes low-income housing development, thus allowing some units to rent at below-market rates. In return, investors receive tax credits paid in annual allotments, generally over 10 years. Without the incentive, affordable rental housing projects do not generate sufficient profit to warrant the investment.
These tax credits can be used to construct new or renovate existing rental buildings. The LIHTC is designed to subsidize either 30 percent or 70 percent of the low-income unit costs in a project. The 30 percent subsidy, which qualifies for the 4 percent tax credit, covers new construction that uses additional subsidies or the acquisition cost of existing buildings. The 70 percent subsidy, or 9 percent tax credit, supports new construction without any additional federal subsidies.
Financed projects must meet LIHTC eligibility requirements for at least 30 years after project completion. In other words, owners must keep the units rent restricted and available to low-income tenants. At the end of the period, the properties remain under the control of the owner.
By fostering a deep relationship with the communities we serve, we are able to catalyze transformational projects that maximize benefits for the investors, developers, and most importantly, the residents.
LIHTC Investment Funds Substance Use Supportive Services
Andy’s Place, a 50-unit residential facility developed as part of the Michigan Permanent Recovery Supportive Housing (PRSH) initiative in response to Michigan’s opioid crisis, It is the first housing development in Michigan, and the first in the nation using the PRSH initiative model. The program is a collaboration between the Michigan Governor’s office, the Michigan State Housing Development Authority (MSHDA), the Michigan Treatment Courts and Cinnaire. It was a 2021 recipient of the Charles L. Edson Tax Credit Excellence Award.
Meet the Fund Management Team: