Low-Income Housing Tax Credit: Eligibility, Rent, and Applying

To qualify for a Low-Income Housing Tax Credit apartment, your household income must fall at or below the limit assigned to the specific unit you’re applying for, your household generally cannot consist entirely of full-time students, and you must pass the property’s document-heavy verification and screening process. LIHTC apartments are privately owned and privately managed. There’s no central waiting list and no universal application. You apply property by property, and each one checks your paperwork against federal rules before offering you a lease.

The program has financed roughly 110,000 units a year since Congress created it in 1986, and affordability restrictions on each building last at least 30 years. That’s the housing stock you’re competing for. Here’s what you need to know to apply well.

Income Limits Are Set Unit by Unit

Every tax-credit property reserves a share of its units for households below specific income thresholds tied to the area median gross income (AMI) published annually by HUD for your county or metropolitan area. When the building was placed in service, the developer locked in one of three set-aside tests, and that choice determines who can live in which unit.

Under the 20-50 test, at least 20 percent of units go to households at or below 50 percent of AMI.
Under the 40-60 test, at least 40 percent of units go to households at or below 60 percent of AMI.¹
Under the average income test, at least 40 percent of units are rent-restricted, each designated at 20, 30, 40, 50, 60, 70, or 80 percent of AMI, with the designated units averaging no more than 60 percent.¹

The average income option, added by Congress in 2018, means one building can hold units set at 30 percent of AMI next to units set at 80 percent.² A household that earns too much for a 50-percent unit at one property might qualify comfortably for a 60- or 80-percent unit at another. Ask each property what the income designation is for the specific unit you’re being considered for, because that’s the number management will compare your household income to.

The income calculation counts every source of income for every adult in the household. If your household has assets above a threshold set by program guidelines, management calculates imputed income from those assets and adds it to your total. That’s why disclosing a life insurance policy with cash value or a real estate holding matters even if it isn’t earning obvious income.

The Full-Time Student Rule Catches Many Applicants

A household in which every member is a full-time student generally cannot occupy a tax-credit unit. A full-time student is anyone enrolled for the hours their school considers full-time attendance during at least five calendar months of the year, and those months don’t have to be consecutive.

The rule is about the whole household, not any one person. If a single household member is not a full-time student, the rule doesn’t apply. If everyone is a full-time student, you can still qualify under one of these statutory exceptions:¹

All adults are married to each other and can file a joint federal tax return.
Every adult is a single parent with minor children, no adult is claimed as a dependent by anyone else, and the children are dependents only of a parent in the household.
At least one member receives benefits under Title IV of the Social Security Act, which includes programs like Temporary Assistance for Needy Families.
At least one member previously received foster care assistance from a state agency.
At least one member is enrolled in a federally funded or similar state or local job training program.

Management has to verify the exception with third-party documentation, and student households recheck their exception status every year. Gather that paperwork before you apply.

Where to Find LIHTC Properties Near You

HUD maintains a searchable LIHTC Database at huduser.gov covering projects placed in service since 1987.³ It maps properties by state, county, and city, though it won’t show real-time vacancies. Your state’s housing finance agency usually keeps a more current list with links to management offices and waitlist status. Many cities include LIHTC properties in their affordable housing locator tools.

Because these buildings are privately managed, there’s no consolidated waiting list. You apply at each property separately, and you can apply to as many as you like at once. That’s almost always the right approach: waiting lists in metropolitan areas run from a few months to several years, and having several irons in the fire shortens your search.

Documents You’ll Need for the Application

Tax-credit properties verify income and household composition far more rigorously than a conventional landlord does. Assemble everything below before you sit down with the application form, which the specific property will provide (there is no universal LIHTC form).

Every household member, regardless of age, must have a Social Security number on file.⁴ Every adult needs valid government-issued photo ID. List every person who will live in the unit, children included.

For income, bring:

Your two most recent federal tax returns, W-2s, and pay stubs covering at least the last six to eight consecutive weeks.
Award letters or statements for Social Security, pensions, disability, alimony, or child support.
Profit and loss statements, business returns, and bank records showing deposits if you’re self-employed.

For assets, bring six consecutive months of statements for every checking account and the most recent statement for savings, retirement, and investment accounts. Disclose real estate, cash-value life insurance, and any other substantial holdings.

What Screening Looks Like and How Long It Takes

Once you submit the application, management launches a mandatory third-party verification process. They contact your employers, banks, and benefits agencies directly. They aren’t allowed to just take your word for it. Expect two to four weeks, longer if an employer drags its feet or an agency requires a signed release.

Most properties also run a credit and criminal background check. Federal law doesn’t ban criminal history screening for LIHTC applicants, though some state and local laws limit how far back a property can look or which offenses can support a denial. If you have a record, ask about the property’s screening criteria before you invest time in the application.

Qualifying doesn’t mean moving in immediately. In most markets you’ll be placed on a waiting list, meaning you’re eligible but no unit matching your household size is currently open. When one opens, management works down the list. Keep your contact information current with every property office you’ve applied to. A missed notification can move you to the back or off the list entirely.

When a unit is offered, you’ll typically need first month’s rent and a security deposit to secure the lease. Application fees, deposit limits, and other move-in costs vary by property and state law.

How Your Rent Will Be Calculated

Rent at a tax-credit apartment isn’t based on what you actually earn. It’s tied to the income limit assigned to the unit and an assumed household size based on the number of bedrooms. The statute assigns 1.5 persons per separate bedroom, and a studio counts as one person.¹ So the maximum rent on a two-bedroom is calculated for a three-person household, whether you’re one person or four.

The formula takes 30 percent of the applicable income limit for that imputed household size and divides by 12. That’s the maximum gross rent, which includes a utility allowance. If you pay electricity or gas directly, management subtracts the utility allowance to arrive at the actual rent charged. If the maximum gross rent works out to $1,050 and the local utility allowance is $150, the rent charged is capped at $900.¹

If you hold a Section 8 Housing Choice Voucher, the voucher payment doesn’t count toward the rent cap, which sometimes puts units within reach that would otherwise sit above your budget.

VAWA Protections Apply From the Application Onward

LIHTC properties are covered by the Violence Against Women Act.⁵ A property cannot deny your application because you are or have been a victim of domestic violence, sexual assault, dating violence, or stalking. If you invoke these protections, management may ask for documentation, and you have 14 business days to provide it. Once you’re a tenant, the property must maintain a model emergency transfer plan letting you move to another safe unit if you reasonably believe staying in your current one puts you at further risk. Property owners must notify you of these rights at three points: when they deny your application, when you move in, and any time they send an eviction or termination notice.

If Your Application Is Denied

Federal law doesn’t require LIHTC properties to offer a formal appeals process, though some state housing agencies impose their own due process rules. The property should tell you the reason. Common ones are income above the unit’s limit, an incomplete application, or a negative background result. Under the Fair Credit Reporting Act you can request a copy of any credit report or background report used against you and dispute inaccurate information. If you believe the denial was discriminatory, file a complaint with HUD’s Office of Fair Housing and Equal Opportunity.

What Happens After You Move In

Income verification doesn’t stop at move-in. Management collects updated income information at recertification every year for the compliance period, and the paperwork looks a lot like your initial application. Mark the deadline. Missing it creates a compliance problem for the property and can put your unit at risk. Buildings where every unit is income-restricted may qualify for a waiver that eliminates annual recertification after initial income verification, and many states relax recertification requirements once a building is past Year 15.⁶

A Raise Doesn’t Cost You the Apartment

If your income rises above the applicable limit, you keep your unit as long as your household income stays at or below 140 percent of that limit. The unit stays classified as low-income and your rent stays at the restricted level. Cross the 140 percent threshold and your unit becomes an “over-income unit,” but you still aren’t evicted. Under the Next Available Unit Rule, the next comparable vacancy in the building must be rented to a qualifying low-income household to rebalance the mix.⁷ An income increase does not trigger a rent increase under the program.

Good Cause Eviction Protection

The extended use agreement recorded against every LIHTC property prohibits evicting or terminating the tenancy of a low-income tenant except for good cause.¹ The protection continues for three years after the extended use period ends, even if that period is terminated early. Federal law leaves the definition of good cause to state and local law, but it typically covers nonpayment, serious or repeated lease violations, property damage, and conduct that interferes with other tenants. A landlord can’t refuse to renew your lease simply because it expired or because they’d prefer to charge market rent while the affordability restrictions still apply. If an owner tries to push you out without a legitimate reason, the good cause rule gives you legal ground to challenge it.

1
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
2
Federal Register. Section 42, Low-Income Housing Credit Average Income Test Regulations
3
HUD User. LIHTC Database Access
4
HUD Exchange. Are Applicant Families Required to Provide Social Security Number Verification for Non-Familial Household Members
5
Office of the Law Revision Counsel. 34 USC 12491 – Housing Protections for Victims of Domestic Violence, Dating Violence, Sexual Assault, and Stalking
6
HUD User. LIHTC Tenant Data Documentation
7
eCFR. 26 CFR 1.42-15 – Available Unit Rule