Back to Home
Helping Virginians Attain Quality, Affordable Housing
Follow Us LinkedIn Facebook YouTube RSS Feed Twitter Virginia Housing Blog Instagram
Text Size: A- A  A+ | Text Only | Print Print

Multifamily Low-Income Housing Tax Credit Program

The Tax Reform Act of 1986 established the federal Low-Income Housing Tax Credit (LIHTC) program under Section 42 of the Internal Revenue Code. This program is generally recognized as the single most effective incentive for rehabilitating existing, or constructing new, affordable multifamily housing. The program is the primary means of attracting private capital, which then is used to create affordable rental housing nationwide.

Virginia Housing administers the program in Virginia.

Program Details

In exchange for producing affordable rental housing, developers receive the benefit of tax credits, which they can sell to investors who use them to offset a portion of their federal tax liability. The value associated with the tax credits allow units in LIHTC developments to be leased to qualified families at below-market rents. The amount of tax credits that developers can apply for depends on the amount and type of additional funding sources, the total amount of qualified development costs to be incurred and the percentage of units set aside in the development for eligible tenants. Each qualified tax credit development must include a minimum percentage of units that will be set aside for eligible tenants, and rents are restricted on these set-aside units.

A qualified housing development must meet either of the following federal requirements:

  • 20 percent or more of the residential units in the development are both rent-restricted and occupied by individuals whose incomes are 50 percent or less of the Area Median Income (AMI); OR
  • 40 percent or more of the residential units in such development are both rent-restricted and occupied by individuals whose incomes are 60 percent or less of AMI.

Tax credits can be claimed only on those units that have been set aside to participate in this program. In addition, development owners can set aside 100 percent of any development for consideration under the tax credit program, and in doing so, can claim the maximum amount of tax credits eligible for the development.


Virginia Housing accepts applications for competitive credits once a year, usually in mid-March. The applications are ranked according to specific scoring criteria outlined in the Qualified Allocation Plan (QAP). Developments are ranked according to their scores in the pools used to subdivide the available per capita credits. Reservations are then made to developments in order of rank, as long as credits are available within the given pools.

 Applications for tax credits that are available with tax-exempt bond financing can be submitted at any time during the year in conjunction with the tax-exempt bond loan underwriting. These applications must meet the minimum requirements of the QAP to be eligible for tax credits, however they do not contain the same time restraints as the competitive tax credits.

Reservation of Credits

The reservation of credits is conditional upon the development sponsor meeting certain requirements by late in the year. Most developments then receive a carryover allocation that gives the owner two years (from the end of the year in which the development received the allocation) to complete construction of the development and have the units available for rent.

Contact Us

Multifamily Development Staff

Multifamily Servicing Staff

Customer Service

Toll Free: 877-VHDA-123
Local: 804-782-1986


Virginia Relay

In Virginia: 711
Toll Free: 800-828-1140


Virginia Housing Fraud, Waste or Abuse Hotline

Phone: 804-915-3146
Website: Reporting Fraud, Waste or Abuse