The Low-Income Housing Tax Credit (LIHTC) program is a federal income tax credit program that allows investors in qualified low-income properties to receive a 10-year, dollar-for-dollar deduction on their federal income taxes. Since 1986, the program has been credited with creating over 2.4 million low-income housing units, as well as supporting nearly 100,000 jobs each year. Each LIHTC transaction is governed by a Land Use Regulatory Agreement (LURA), which stipulates what a landlord can and cannot do with their property during the property’s compliance period (usually lasting 15 years), and the extended period (which varies but may last an additional 5-10 years).

In regards to the Freddie Mac SBL program, properties that currently have a LURA and are still in their compliance period are not generally eligible. However, if the property has 75 units, gets special approval from Freddie Mac, and is either in the last 2 years of its compliance period (or is already in its extended use period), the property may be eligible.

The benefits of using Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans include:

• A 10-year, dollar-for-dollar deduction on federal income taxes
• Creation of over 2.4 million low-income housing units
• Support of nearly 100,000 jobs each year
• A Land Use Regulatory Agreement (LURA) that stipulates what a landlord can and cannot do with their property
• The potential for special approval from Freddie Mac for properties with 75 units

In regards to the Freddie Mac SBL program, properties that currently have a Land Use Regulatory Agreement (LURA) and are still in their compliance period are not generally eligible. However, if the property has 75 units, gets special approval from Freddie Mac, and is either in the last 2 years of its compliance period (or is already in its extended use period), the property may be eligible.

Eligible Property Types for the Freddie Mac SBL Program include:

• Properties with commercial space that does not comprise more than 25% of the property’s gross income
• Independent living properties for seniors without resident services
• LIHTC (Low Income Housing Tax Credits), with land restrictions in the extended use period or the final 24 months of the initial restriction period (to qualify, eligible LIHTC properties must have 75 units or less and get special Freddie Mac approval)
• Other regulatory restrictions that limit income/rent (funds must be disbursed)
• Tax abatement properties
• Tenant-based housing voucher properties
• Buildings can have local rent subsidies for 10% or less units, as long as tenant eligibility certification is not required
• Cooperatives (must be located in New York City or Long Island)

In contrast, properties that are ineligible for the SBL program include:

• LIHTC properties with more than 24 months left on their Land Use Restrictive Agreement
• Tax-exempt bonds Interest Reduction Payments (IRPs)
• Properties with a greater than 50% concentration of student or military housing
• Properties with Section 8 contractors or other project-based HAP contracts
• Master lease HTC (Historic Tax Credit) properties

The advantages of using Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans include:

• Up to 80% LTV allowance
• Streamlined application process
• Loans are non-recourse
• Interest-only options
• 30-year amortizations
• Variety of hybrid ARM and fixed-rate options available
• Loans are assumable with approval and 1% fee
• 60-120 day rate locks typically available

For more information, check out Freddie Mac’s official 9% LIHTC Cash Loan Product Sheet.

To apply for Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans, you must meet the following criteria:

• Your property must have at least 75 units.
• Your property must have special approval from Freddie Mac.
• Your property must be either in the last 2 years of its compliance period or in its extended use period.

For more information, please refer to the Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans article and the Freddie Mac Small Balance Loans article.

You can also refer to Freddie Mac's official 9% LIHTC Cash Loan Product Sheet for more information.

The risks associated with Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans include:

• The property must be in the last 2 years of its compliance period (or already in its extended use period) in order to be eligible.
• The property must have 75 units and get special approval from Freddie Mac.
• The property must adhere to the Land Use Regulatory Agreement (LURA) which stipulates what a landlord can and cannot do with their property during the property’s compliance period.
• Ineligible properties include seniors housing with residential services, student housing (greater than 50% concentration), military housing (greater than 50% concentration), properties with Housing Assistance Program (HAP) Section 8 contracts and other project-based housing assistance payment contracts, LIHTC properties with LURAs in compliance years 1-12, Tax-exempt bonds Interest Reduction Payments (IRPs), and Historic Tax Credit (HTC) properties with a master lease structure.

For more information, please refer to the following sources:

• Low-Income Housing Tax Credit/LIHTC for Freddie Mac Small Balance Loans
• Freddie Mac Small Balance Loans
• Sample Terms for the Freddie Mac Small Balance Loan in 2023: Eligible Properties
• Freddie Mac 9% LIHTC Cash Loans