Which 1986 U.S. law created the Low-Income Housing Tax Credit, a major incentive for affordable rental housing?

The Tax Reform Act of 1986 created the Low-Income Housing Tax Credit, a major U.S. incentive for affordable rental housing.

The Low-Income Housing Tax Credit, usually abbreviated LIHTC, was established by the Tax Reform Act of 1986. It provides federal tax credits to encourage private investment in the construction, rehabilitation, and preservation of rental housing reserved for lower-income households.

State housing agencies generally allocate credits to projects through competitive plans. Developers commonly sell the credits to investors, generating equity that helps finance construction or renovation. In return, projects must follow affordability, rent, occupancy, and compliance requirements for a specified period.

LIHTC is not a direct monthly rent payment to tenants and is not the same as public housing. It is a financing mechanism that uses the federal tax system to attract private capital into income-restricted rental developments. Congress has modified the program several times since 1986, and the Internal Revenue Service oversees important federal rules.