40 Years of the Housing Credit

Today marks 40 years since President Reagan signed the Tax Reform Act of 1986 on October 22, 1986. It was a sweeping overhaul of the federal tax code, and tucked inside was a provision that changed affordable housing in America: the Low-Income Housing Tax Credit (LIHTC).

Before 1986, developers relied on tax incentives that made building rental housing more attractive. The new law removed many of those older incentives, and the Housing Credit was created to fill the gap with something more targeted. It was built on a simple idea: encourage private investment in the construction and renovation of affordable apartment homes.

Here is how it works. Each year, states receive an allocation of credits, and in Florida they are awarded through Florida Housing Finance Corporation. Developers apply for the credits, and investors purchase them to provide equity for the project. In exchange, the community must keep rents affordable and serve households within set income limits for decades. Congress later made the program permanent in 1993, and it has since helped finance millions of apartment homes across the country.

At Royal American, the majority of the communities we develop, build, and manage are tax credit properties. For 40 years, this program has shaped the work we do across Royal American Development, Royal American Construction, and Royal American Management. It is the reason so many of our communities exist, and it is a big part of why we are who we are: a team that believes in helping who we can by providing quality homes and service for the people who live in them.

Here’s to 40 years, and to the many more homes still to come.