LIHTC at 40: How the Low-Income Housing Tax Credit Became Affordable Housing's Top Tool

Few federal programs have shaped the affordable housing landscape more than the Low-Income Housing Tax Credit.

"It's the single most important housing tool we have," said Kari Downes, executive vice president and head of Housing Credit investments at Enterprise Community Partners. "It's the main way we provide stable, quality, affordable homes in this country."

What began as a provision of the Tax Reform Act of 1986 has become the nation's primary way to produce and preserve affordable rental housing. According to the ACTION Campaign, co-chaired by Enterprise, LIHTC has helped finance 4.28 million affordable homes and created 7.2 million jobs through 2025.

As LIHTC marks its 40th anniversary on October 22, 2026, the milestone offers an opportunity to reflect on both the program's extraordinary growth and the coalition of housing advocates, policymakers, developers, and investors who helped bring it to life and sustain it over four decades.

Among them was the co-founder of Enterprise Community Partners, Jim Rouse, who joined other housing leaders in advocating for a new approach to affordable housing finance during the tax reform debates of the 1980s.

Today, Enterprise is one of the nation's leading affordable housing syndicators and investors. This year, the organization closed its 3,000th LIHTC-financed development, helping to provide homes for more than half a million people across all 50 states; Washington, D.C.; Puerto Rico; and the U.S. Virgin Islands.

These converging milestones offer a window into one of the country's most consequential policy stories: how a tax provision became the dominant force in affordable housing production, channeling private investment into opportunity for millions of people.

A New Model for Affordable Housing

Kim Leaf first joined Enterprise in 1987 as Rouse's receptionist. She had a front-row seat to what would become one of the most consequential developments in the history of affordable housing in America: the implementation of the Low-Income Housing Tax Credit.

In the mid-1980s, policymakers were overhauling the federal tax code, and housing advocates worried the changes would significantly reduce incentives for affordable housing development. Many affordable homes already suffered from decades of underinvestment, and housing leaders feared the situation would just get worse.

"Jim Rouse was a brilliant man who saw that this act would take away the incentive for developers to build affordable housing," said Leaf, now a senior asset manager in Enterprise's Housing Credit Investments business. "And that was not going to happen under Mr. Rouse's watch. He was so committed to maintaining a way to build more affordable housing. I vividly remember him saying, on a regular basis, 'What ought to be, can be.'"

The living room and bedroom of a home at Twin Rivers, an Enterprise Community Development in Columbia, Maryland, that was supported by LIHTC and Enterprise's one millionth home created or preserved.

Rouse joined developers, housing advocates, business leaders, and policymakers in advancing an alternative approach: a program that would use the tax code to encourage private investment in affordable housing.

The resulting Low-Income Housing Tax Credit was signed into law on October 22, 1986, and has since become the nation's primary tool for financing affordable rental housing. Developers receive tax credits that can be sold to investors, generating equity that helps make affordable housing developments financially feasible while reducing the amount of debt a property must carry. In exchange, developments must remain affordable for at least 30 years, helping ensure that the housing created through the program continues serving communities long after construction is complete.

That structure would become one of the program's defining strengths. Rather than relying solely on direct government funding, it aligns public goals with private investment.

"The fact that it was created with a market-based solution rather than being federally funded made it attractive in a bipartisan way," Downes said. "Everybody liked that it gave private investors the incentive to put capital into affordable housing."

Building Support for a New Idea

Actor, filmmaker, and affordable housing advocate Edward Norton, Rouse's grandson, worked for Enterprise in New York in the early 1990s, when the tax credit was still finding its footing. He saw firsthand the effort required to persuade business leaders, investors, and policymakers that the new financing model could succeed.

"I was working for Enterprise in New York in the early '90s and the Low-Income Housing Tax Credit was just getting going, and this whole idea was conceptually very new to a lot of people," Norton said. "My grandfather would get these captains of industry into these big rooms and lay into them, basically saying, 'If the people in this room don't get serious about the conditions at the bottom in this country, we are going to see an absolute collapse of everything that we take for granted to be great about America.'"

Those efforts helped broaden support for the program and reinforce the idea that affordable housing was not merely a social need but an economic one. In 1993, LIHTC was made permanent, providing certainty for developers, investors, and communities - and paving the way for decades of affordable housing production.

Over the next 30 years, LIHTC evolved from a promising policy idea into the dominant financing mechanism for affordable rental housing in the United States.

Forty Years of Impact

The reason LIHTC continues to enjoy broad support is simple: it works.

"LIHTC is our nation's number one tool for creating affordable rental housing," said Liz Osborn, Enterprise's vice president of policy.

According to the ACTION Campaign, LIHTC has served 9.97 million low-income households, generated $815 billion in wages and business income, and produced $293 billion in tax revenue through 2025, making it a powerful economic development engine. It is the single largest source of federal financing for the preservation of affordable rental housing, and it drives the vast majority of newly constructed affordable rental homes nationwide.

Those national figures help explain why the program remains central to housing policy. Enterprise's own portfolio offers another lens into LIHTC's reach. Since 1986, Enterprise has helped finance nearly 220,000 affordable homes through 3,000 LIHTC developments.

Those developments have provided homes for more than 505,000 people while supporting communities in every state, as well as Washington, D.C.; Puerto Rico; and the U.S. Virgin Islands, including through the creation of more than 352,000 jobs. Nearly three-quarters of Enterprise's LIHTC-financed homes serve families, while approximately one-quarter serve seniors.

For Downes, one of the program's most important achievements is the quality it ensures. "Without LIHTC, we wouldn't have as much affordable housing, and the housing we would have wouldn't be in as good of condition," she said.

Leaf has spent decades visiting LIHTC-financed properties and monitoring their performance. Over time, she said, the standards associated with the program have helped reshape expectations about what affordable housing can be.

"In my job, I walk properties, I walk units to make sure they are meeting standards, and my mentality has always been to ask not only would I live there, but when my kids were younger, would they have been comfortable bringing a friend home?" she said. "Because LIHTC holds developers to very high standards, the answer is usually yes."

Why LIHTC Endures

By bringing together developers, investors, lenders, syndicators, state housing agencies, and community organizations, LIHTC creates multiple layers of accountability and long-term oversight.

Jim Knight, president and CEO of Jubilee Housing, an affordable housing provider with LIHTC properties in Washington, D.C., and a long history with Enterprise, has seen those dynamics firsthand.

Jubilee Housing, Enterprise Community Partners, residents, and partners kicking off the preservation, renovation, and recapitalization of The Mozart, a LIHTC community in Washington, D.C., that Enterprise first partnered with Jubilee on in 1973.

"LIHTC is an amazing mechanism," Knight said. "It brings capital from the marketplace into transactions that wouldn't work otherwise, as there is no one else at the door willing to bring 30-40% of a transaction's costs with no return. It's a lovely, intellectual solution."

LIHTC's structure also helps explain its staying power. The program operates through a "pay-for-success" model: developments must be completed and occupied by eligible low-income residents before tax credits are fully realized, and properties are subject to ongoing compliance requirements to maintain affordability. Combined with oversight from investors, lenders, and state housing agencies, those requirements help ensure that affordable homes remain affordable and well-maintained over time

"The requirements that come with the investment, such as having a syndicator and an institutional investor, means you have double asset management," Knight said. "There are so many parties who are committed to a successful outcome that the foreclosure rates are almost zero. The investors make money and the housing gets developed and occupied by people who couldn't afford it otherwise. Everyone wins."

The Next 40 Years of LIHTC

Today, the need for quality, affordable housing remains urgent.

According to the ACTION Campaign, more than 12 million renter households nationwide spend over half their income on housing costs, while a worker earning the federal minimum wage would need to work 90 hours per week to afford a one-bedroom apartment at the national average fair market rent.

Last year, Congress took historic action to expand the Housing Credit. In the One Big Beautiful Bill Act, Congress provided the biggest permanent increase in resources for the Housing Credit in at least two decades. These changes are expected to finance an additional 1.2 million affordable homes across the country over the next ten years.

Additional momentum came from the bipartisan 21st Century ROAD to Housing Act, a law that Congress passed earlier this year which included several provisions aimed at strengthening affordable housing finance. For LIHTC, one of the most significant changes was an increase in the cap on public welfare investments that banks can make, raising it from 15% of capital and surplus to 20%. Because banks are the largest source of LIHTC equity, the change is expected to give active investors more room to continue funding affordable housing developments and could help support additional housing production and preservation in the years ahead.

"The fact that it had so much support is reflective of housing being raised as an issue by every constituency across the country, including in urban, suburban, and rural communities," said Osborn.

While LIHTC remains the foundation of affordable housing production in the U.S., advocates increasingly view it as part of a broader set of tools needed to address the country's housing shortage.

"We're drawing on our history as an innovator around affordable housing development, starting with the creation of the LIHTC program, and also looking ahead to what new, innovative products and programs are out there that can complement the Low-Income Housing Tax Credit," Osborn said. "We'll lean on that history and those learnings to continue to work toward solving the housing crisis in this country."

Learn more about the Low-Income Housing Tax Credit.

Jackie Krentzman is a San Francisco Bay Area-based writer focused on housing and homelessness, environment and climate, economic development, and women's leadership.