The federal government allocates low-income housing tax credits to each state based on population. The state, through its state housing finance agency or other allocating agency, then awards those credits to projects that best meet its Qualified Allocation Plan (QAP), which outlines the state’s goals for affordable housing. Each state establishes its own policies and procedures to determine which developers qualify for credits.
Once awarded credits, a developer sells them to an individual investor or, more commonly, to a tax-credit syndication fund made up of equity from one or from many investors. In return, the investors receive a credit against their federal income tax based on the size of their investments. They can also realize losses, which provide an additional tax benefit.
Tax-credit syndicators help bridge the gap between the various parties to affordable housing transactions. Syndicators raise money from investors and identify low-income housing projects in which to invest that capital. National Equity Fund® is particularly focused on building long-term relationships with partners.