Housing Credits & HOME

The Low Income Housing Tax Credit (LIHTC) program is the largest production driver of new and rehabilitated affordable rental housing in the nation. Each year, the Internal Revenue Service distributes housing credits to state housing finance agencies. 

AHFA, as Alabama’s designated administrator of the LIHTC program, then allocates these credits by conducting a competitive application cycle that ensures credits are distributed throughout the state to areas with the greatest needs. AHFA implements allocation plans each year, which include selection criteria, an evaluation process, design quality standards, environmental requirements, and compliance monitoring procedures.

Housing credits provide a federal income tax credit as an incentive to investors. Investors may receive a dollar-for-dollar credit against their federal income tax liability each year for 10 years. In exchange for receiving the credit, investors and/or owners must reserve a percentage of units for the area’s lower-income residents, based upon the area’s median income. In turn, owners generally make a 30-year commitment to ensure the units are decent, safe, and affordable for eligible tenants.

The HOME Investment Partnerships Program (HOME) is a federally funded program established in 1990 as part of the Cranston-Gonzalez National Affordable housing Act (the “Act”). HOME provides funding to developers to construct new, affordable rental housing. 

AHFA, as Alabama's HOME program administrator, conducts a competitive application cycle. As it does with housing credits, AHFA implements action plans each year, which include selection criteria, an evaluation process, design quality standards, environmental requirements, and compliance monitoring procedures.

In order to ensure programs benefit the greatest number of Alabamians possible, HOME funds are combined with housing credits. Leveraging these two sources of funds allows projects to target additional low-income families. 

The American Rescue Plan (ARP), enacted on March 11, 2021, provides $5 billion to assist individuals or households who are homeless, at risk of homelessness, and other vulnerable populations, by providing housing, rental assistance, supportive services, and non-congregate shelter, to reduce homelessness and increase housing stability across the country. These grant funds will be administered through HUD's HOME Investment Partnerships Program (HOME).

AHFA developed a HOME-ARP Allocation Plan ("the Plan") using a competitive application cycle and point scoring system similar to, but more concise than, the Low-Income Housing Tax Credit program. The Plan is designed to provide funds to develop new construction of decent, safe and sanitary rental housing, with an initial preference for populations that are homeless, at risk of homelessness, fleeing or attempting to flee, domestic violence, dating violence, sexual assault, stalking, or human trafficking and other qualifying populations.

Click here for more information about ARP.

HOME regulations require that 15 percent of HOME funds each year must be allocated to projects owned by Community Housing Development Organizations (CHDOs).

Click here for more information about becoming a CHDO.