How LIHTC Development Works in Texas: A Guide for Communities and Investors

The Low-Income Housing Tax Credit — known as LIHTC — is the most important financing tool for affordable housing development in the United States. Since 1986, it has funded the construction and rehabilitation of more than three million affordable rental units nationwide. In Texas alone, the program is responsible for the majority of new affordable housing built each year.

Here's how it works: the federal government allocates tax credits to each state based on population. In Texas, those credits are administered by the Texas Department of Housing and Community Affairs (TDHCA). Developers apply to TDHCA for an allocation of credits, and if awarded, they sell those credits to investors — typically banks or large corporations — in exchange for equity financing. That equity reduces the amount of debt the development needs to carry, which in turn allows rents to be set below market rate for qualifying residents.

To qualify for LIHTC housing, residents must earn at or below a percentage of the Area Median Income (AMI) — commonly 50% or 60% AMI depending on the project type. In exchange, developers agree to keep rents affordable for a minimum compliance period, typically 30 years.

The application and award process is competitive. TDHCA evaluates applications using a Qualified Allocation Plan (QAP), which scores developments on factors including location, community need, design quality, developer experience, and financial feasibility. Projects in underserved areas or those serving extremely low-income households often score higher.

Investment Builders Inc. has been active in LIHTC development across Texas, New Mexico, and Arizona since the program's early years. With over 8,000 units developed and more than $1 billion in completed projects, IBI brings the kind of track record and TDHCA relationship that makes the difference in a competitive awards cycle.

For communities, LIHTC development means more than just units — it means professionally managed, well-designed housing that stabilizes neighborhoods and expands access to quality homes. For investors and housing authorities, it means a reliable, federally backed financing structure with a proven four-decade track record.