Low Income Housing Tax Credit Extended Use Agreement: What You Need to Know

The Low Income Housing Tax Credit (LIHTC) program was established by the Tax Reform Act of 1986 to increase the supply of affordable rental housing for low-income households. The program provides developers with a tax credit for every eligible low-income housing unit they build or rehabilitate. These tax credits are then sold to investors who use them to offset their tax liability. But in exchange for these tax credits, developers must agree to keep the units affordable for a certain period of time, usually 30 years.

This agreement is known as the LIHTC Extended Use Agreement (EUA), and it is a legally binding contract between the developer and the state housing agency that administers the LIHTC program. The EUA ensures that the affordable housing units remain affordable for at least the minimum period of time required by the program. Developers who fail to comply with this agreement face financial penalties and the risk of losing their tax credits.

The EUA specifies the terms and conditions of the agreement, including the number of affordable units, the rent levels, and the income restrictions. It also outlines the responsibilities of both the developer and the state housing agency. The developer is responsible for maintaining the units in good condition, providing tenant services, and reporting to the state housing agency on a regular basis. The state housing agency is responsible for monitoring the developer`s compliance with the agreement and enforcing the terms of the agreement.

The EUA also includes provisions for transferring ownership or refinancing the property. If the developer wants to sell the property, they must first offer it to a qualified nonprofit organization or government agency at a price that reflects the value of the remaining tax credits. If the property is refinanced, the state housing agency must review the terms of the new financing to ensure that they do not violate the terms of the EUA.

In summary, the LIHTC Extended Use Agreement is a critical component of the Low Income Housing Tax Credit program. It ensures that the affordable housing units remain affordable for at least 30 years, and it protects the interests of both the developer and the state housing agency. Developers who participate in the program must understand the terms and conditions of the EUA and comply with them to avoid financial penalties and the risk of losing their tax credits.