A little-known federal program introduced when Ronald Reagan was president could now help North Carolina build $1.47 billion in affordable apartments, offering much-needed relief to homebuyers and creating thousands of jobs.
The Low-Income Housing Tax Credit (LIHTC) was created under the Tax Reform Act of 1986 and started allocating credits nationwide a year later. The program incentivizes private developers to build or rehabilitate affordable rental housing by offering federal tax credits. In return, developers agree to maintain rents affordable for low-income households for a time ranging between 15 and 30 years.
North Carolina, where home prices have risen by nearly 70 percent between the summer of 2020 and summer of 2025, according to Redfin data, and the average rent is $1,870, is set to add thousands of affordable apartments under the program this year, according to the agency handling the federal tax credits in the state.
How Does the Program Work?
“The Low-Income Housing Tax Credit (LIHTC) program is the nation’s most-successful tool for financing affordable rental housing,” Scott Farmer, the executive director of the North Carolina Housing Finance Agency (NCHFA) who administers the program, told Newsweek.
“LIHTC leverages federal dollars and private capital to maximize the number of affordable homes we can create,” Farmer said. “Specifically, LIHTC incentivizes private developers to build apartments by allowing equity investors to claim a deduction on their federal tax liability for a 10-year period in exchange for keeping rents affordable for 30 years.”
Developers who obtain the federal tax credits can then sell them at a lower price, usually attracting the attention of large corporate entities that have significant tax obligations. This investment of private capital, according to Farmer, reduces the debt burden on developments, “which, in turn, lowers rents making housing more affordable to more people,” he said.
“This private investment allows states like North Carolina to build and preserve thousands of homes every year for working families, seniors, and people with special needs,” Farmer added.
The program is also able to drive economic growth in the state, Farmer said, “creating billions in property value, supporting hundreds of thousands of jobs and generating significant tax revenue.”
While not many might have heard of this Reagan-era program, “it’s a resource that continues to deliver long-term value for all North Carolinians,” Farmer said. The program allocates tax credits to each state on the basis of their population. North Carolina has about $34 million a year.
What Is the Benefit for Developers?
According to Farmer, the program offers developers “a reliable source of financing needed to turn otherwise infeasible housing developments into reality,” he said.
“With equity from investors who purchase the credits, developers can create affordable apartments that meet a critical community need while still covering the costs to build and operate the apartments,” Farmer added.
Beyond improving financial viability, the program offers developers the opportunity for long-term, steady returns through management fees, development fees and a pipeline of stable real-estate investments, according to Farmer.
“It also positions developers as vital community partners who are addressing housing needs in areas where demand for affordable homes far outpaces supply,” he said.
How Will It Help North Carolinians?
While the median asking rent in North Carolina is below the national average of $2,100, many renting households in the state are cost-burdened and could benefit from more affordable options as the one promised under LIHTC. In 2024, according to data from the North Carolina Housing Coalition, almost 1.2 million renting households in the state paid more than 30 percent of their income on housing.
Federal tax credits, together with other financing awarded this year to the state, will provide more than $1.47 billion in affordable apartments in North Carolina, according to the NCHFA.
“This work is expected to support 21,960 jobs and generate $95.3 million in state and local tax revenue,” Farmer said.
This year, 50 developments were approved in the state, which will produce more than 5,000 privately owned and managed affordable apartments in our state, including 4,150 apartments for families and 862 for seniors, according to Farmer. At least 500 of these apartments will be targeted for people with disabilities.
The new additions, Farmer said, will bring the number of apartments built under the Reagan-era program in North Carolina to more than 133,900 since 1987.
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