HUD Caps Rent Increases for LIHTC-Financed Properties at 10%

HUD’s Office of Policy Development and Research announced in its annual income limits dataset a 10% limit to rent increases in rental properties financed with federal Low-Income Housing Tax Credits (LIHTC). In a statement, NLIHC president and CEO Diane Yentel called the decision “an important win for millions of renters living in tax credit-financed properties.” Under the LIHTC program, rents can increase annually by 5% or two times the percentage change in national median income, whichever is higher. HUD’s new cap limits such rent increases to no more than 10%, regardless of the median income change.

The decision marks an important effort to stabilize rents in LIHTC properties, which are already too expensive for many residents with the lowest incomes. LIHTC is targeted to build homes affordable to households earning up to 50% or 60% of the area median income. As a result, extremely low-income households can generally only afford rent in a LIHTC development if they receive rental assistance. The majority (58%) of extremely low-income renters living in LIHTC developments who do not receive rental assistance are severely cost burdened, paying more than half their limited incomes on rent. One emergency or unexpected expense can send these households into homelessness.

NLIHC supports the measure to help stop rent gouging in federally financed properties and is pushing for similar limits on properties with federally backed mortgages (those managed by the Federal Housing Finance Agency), as called for in the FHFA’s request for input on tenant protections (see Memo, 8/7/2023). NLIHC also urges Congress to make needed reforms to LIHTC to make LIHTC-financed properties more affordable to people with the lowest incomes.

To learn more about the cap, view the HUD Income Limits page for 2024. Under the “Methodology Change FAQ” tab, advocates can find a “Modification to the cap” section. The section explains that “[t]his year, HUD is putting an additional parameter such that if twice the change in national median income is over 10%, the cap in that year can’t be greater than 10%. We are calling this the ‘cap-on-cap’. HUD issued a Notice in January 2024 seeking comments on this change, and after consideration of the comments has decided to move forward with the change.” HUD asserts that one reason for the modification involves tenant protections in developments financed by the HOME Investment Partnerships Program and LIHTC: “By limiting increases in income limits, HUD decreases the burden on low-income households who otherwise would face a large single-year rent increase resulting from higher income limits.”

View the HUD Income Limits with the 10% Cap Methodology and FAQ here.

Read NLIHC’s statement on the LIHTC rent increase cap here.