The California Tax Credit Allocation Committee (CTCAC) administers the federal and state Low-Income Housing Tax Credit (LIHTC) program which encourages private investment in affordable rental housing for households meeting certain income requirements. In addition to allocating tax credits, CTCAC provides federal compliance monitoring for the initial 15 years and then continues auditing and monitoring projects throughout the regulatory agreement period, in most cases for a total of 55 years.
LIHTCs are available for new construction projects or existing properties undergoing rehabilitation. Two types of federal tax credits are available and are generally referred to as nine percent (9%) and four percent (4%) LIHTCs. Each number refers to the percentage that is multiplied against a project’s requested “qualified basis” to determine the maximum amount of annual federal credits CTCAC may award the project. The amount of 9% federal credits is limited and calculated at a per capita amount of $3.416. The federal 4% LIHTCs derive from a project’s use of tax-exempt private activity bond (PABs) authority allocated by the California Debt Limit Allocation Committee and are limited by the amount of PABs annually available to California.
Recognizing the high cost of developing housing in California, the state legislature created the state low-income housing tax credit (state LIHTC) program in 1987 to augment the federal LIHTC program, which are only available to projects that previously received, or are concurrently receiving, an allocation of federal LIHTCs. Of the annual statutory state credit ceiling, 15% is available to be combined with federal 4% LIHTC acquisition/rehabilitation projects and the remaining balance is allocated through the federal 9% LIHTC geographic apportionments. The state also provides $500,000 in farmworker tax credits annually.
Since 2020, the state budget has provided an additional $500 million in state low-income housing tax credits (enhanced state LIHTCs) to be combined with federal 4% LIHTCs for new construction multifamily housing projects. In 2025 and 2026, $100 million was set aside to be paired with projects receiving funding from the California Housing Finance Agency’s Mixed-Income Program and $25 million was set aside for farmworker housing.
