If you’re seeking affordable housing, consider tax credit apartments. Those who meet the program’s requirements can save on rent while getting a nice home for their family.
Many families prefer to own a house rather than pay rent, but don't have time to save for a mortgage downpayment and have to keep renting. To feed your family, save for the retirement, and tackle student loan debt, you want affordable rent.
Tax credit apartments, explained
In 1986, the government took a step to support the construction of affordable housing units for low-income families. Through the low-income housing tax credit program, the government subsidizes the construction of affordable apartments, single-family homes, duplexes, and townhouses. The program has built more than three million housing units since its inception.
The housing tax credit program doesn’t provide direct funding to projects. Instead, the government offers tax credits to developers to offset the cost of building low-cost rental housing units. The tax credit means developers can lower their income tax liability once they start collecting rent on properties.
The program usually lets developers claim the credit for at least 10 years once they start leasing. Many developers sell the credits to investors to raise money for their projects.
Tax credit apartments have requirements and rent limits
Properties built with the support of the housing tax credit are subject to tenant selection requirements and rent restrictions on landlords. At least 20 percent of the units should be reserved for tenants with income that's 50 percent or less than the area’s median income, and at least 40 percent of the units should be let to people whose income is 60 percent or less than the median.
Landlords are barred from leasing to people whose income exceeds 80 percent of the area’s median income, and landlords can’t charge more than 30 percent of 50 or 60 percent of the area’s median income. Therefore, in a neighborhood where the median income is $50,000, the 30 percent rule would limit rent to $9,000 per year.
What's needed to qualify for a tax credit apartment, and how to apply
You need to apply to be accepted into a tax credit rental program. The process begins with searching for available properties and completing an application once you find a suitable apartment.
To qualify to live a tax credit apartment, your income must not exceed 60 percent of your area’s median income. If you have a poor credit score or criminal record, your approval may be complicated or you may be disqualified.
Your rental history may also be reviewed. A past marked by issues with landlords, numerous complaints, and late payments may make your qualification difficult.
Your application may also be denied if you made mistakes while completing the form or there were errors on the side of those reviewing the request. If that happens, you can always appeal.