Low Income Housing: Why is Rent so Low

What is Low Income Housing?

Low income apartments are those that are given Tax Credits by the City of New York in order for low income households (or moderate income) to be able to afford a place to live.

But what are Tax Credits you might ask!?....

The LOW INCOME TAX CREDIT was a program that was signed into law in the year 1986. This program was designed to construct new buildings and renovate old buildings so that people could afford rental housing.

A tax credit is a reduction in the taxes that the owner pays each year.
For Example:

An owner has to pay the taxes for this year on his building to the IRS. Just like regular individuals, a person that owns a building HAS to pay taxes on the building. Well, if the owner owes $10,000 to the city, but he received $5,000 in TAX CREDITS so that he could renovate his building and charge lower rent, then he will only owe the remaining $5,000.

Such as.... 1 Tax Credit= $1

So, are tax credit buildings subsidized?!?

Yes they are! They are not subsidized like the HUD 202 buildings which are senior buildings that have SECTION 8, but they are similar. It is overlooked by the federal government and there are rules and regulations that an owner and a tenant has to follow in order to continue receiving the lower rent and tax credits.

Example of a Tax Credit Unit, if you still haven't understood:

Tommy applies for a low income tax credit building. He read in the newspaper ad that the rent for a 1 bedroom apartment in that building was only $590.

$590!!??? But how can rent be so low?

Well, this is where tax credits are explained.

Tommy applied for the building and was called for an interview. He made sure he met the income requirements and that he was not a Full Time student because he knew that otherwise he would not qualify. All of his information such as his income, his credit, his household composition and other factors were verified. Soon after, he moved into his low income apartment.

The rent is THAT low because the owner signed a contract with the IRS  (Federal Agency) that in order for him to receive his tax credits, he needed to provide a certain number of units at a very low rent price.

So here everybody wins! The owner of the building wins because his taxes would be reduced immensely and the tenant or prospective applicant wins because they only have to pay really low rent for an apartment.

This is why if you live in a low income tax credit building, you must undergo yearly recertifications (verification of information such as income and household composition) and yearly inspections of the apartment.

The management company has to keep yearly records of your information in order for the government or Housing Finance Agency to verify that the owner is still charging the rent that they're supposed to and that the tenant doesn't break any of the tax credit rules.

Any other questions? Feel free to e-mail me at Official.head.executive@gmail.com