Combining LIHTC and Community Land Trusts Can Expand Permanently Affordable Housing, But Requires Significant Adaptation

By Esther Y. Colón-Bermúdez, NLIHC Research Analyst 

The Detroit Justice Center (DJC) recently published an article, "Exploring Compatibility: Utilizing Low-Income Housing Tax Credits (LIHTC) for Community Land Trust (CLT) Developments," examining whether and how Community Land Trusts are using the federal LIHTC program to finance affordable rental housing while preserving long-term affordability and community stewardship. Drawing on a survey of CLTs across the US, follow-up interviews, and case studies, the report finds that LIHTC and CLTs are successfully combined to create permanently affordable housing, but doing so requires significant organizational adaptation and specialized technical assistance.  

The Low-income Housing Tax Credit (LIHTC) is one of the nation's primary mechanisms for financing affordable rental housing development. LIHTC development is financially complex, often involves for-profit entities, and LIHTC-financed housing is not required to remain permanently affordable. Community Land Trusts (CLTs), by contrast, are nonprofit, community-based organizations that use a shared equity model to ensure long-term affordability. They do this by retaining ownership of the land while allowing residents to own the structures on it through a long-term ground lease that limits equity appreciation and keeps homes permanently out of the speculative market. As CLTs seek to grow and diversify their funding sources, LIHTC has emerged as a promising but complex financing solution to produce affordable housing at scale. 

Detroit Justice Center conducted a nationwide survey of CLTs to examine how they are navigating the use of LIHTC. They received detailed responses from more than 30 organizations across the country, followed by interviews with four CLT leaders to gather deeper insights into their experiences and recommendations for using LIHTC for rental housing development. The survey provided insights into organizational capacity, governance structures, financing strategies, and the opportunities and challenges associated with integrating LIHTC into the CLT model. 

The survey findings revealed strong familiarity with and interest in LIHTC among CLTs. Ninety percent of survey respondents were familiar with the program; 64% had considered using it; and 55% actually implemented it. Most respondents who had developed LIHTC housing indicated they would use the program again. However, respondents frequently cited complexity, capacity constraints, competition for credits, and concerns about alignment with permanent affordability goals as significant challenges. Smaller organizations in particular reported difficulties navigating applications and compliance requirements. Most respondents with LIHTC experience also relied on third-party property managers due to limited capacity and the complexity of LIHTC compliance requirements, which can complicate stewardship and resident engagement. Despite these challenges, around 63% of CLTs viewed LIHTC as a valuable tool and often as the only viable source of funding for larger-scale rental housing production. 

Long-term affordability outcomes depend heavily on organizational capacity and the degree of CLT control retained. The study’s Four-Level Control Matrix identified four CLT-LIHTC partnership models: Full Control, where the CLT leads development and retains ownership; Partial Control, where responsibilities are shared with an experienced LIHTC partner; Purchase Option, where the CLT secures future ownership rights; and Separate LLC, where governance is shared through a jointly owned entity. Case studies across four states showed that Full Control better supported long-term affordability, but required greater institutional capacity, while Partial Control and Purchase Option models made LIHTC development more accessible for smaller or less experienced CLTs. Separate LLC models can help satisfy financing and investor requirements while allowing CLTs to retain substantial influence over project decisions in larger or more complex rental developments.  

LIHTC-CLT partnerships offer a promising opportunity to combine large-scale affordable housing production with permanent affordability. The report recommends that state housing finance agencies incorporate CLT-specific provisions and stronger incentives into their Qualified Allocation Plans. It also calls for expanded technical assistance and capacity-building support to help smaller CLTs navigate the complexity of LIHTC applications and compliance requirements. Together, these policy changes could significantly improve CLT-LIHTC compatibility and strengthen the ability of CLTs to expand access to affordable housing at scale while preserving long-term affordability. 

Read the full report.