Maximizing the Bottom Line: Using Alternative Methods to Compute LIHTC Utility Allowances

By Caitlin Jones
July 20, 2011 0 min read

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By A. J. Johnson

Tax Credit Advisor, July 2011: With rising energy costs, it’s more important than ever for low-income housing tax credit properties to be as energy-efficient as possible. But for highly energy-efficient properties in which tenants pay their own utility costs, it may make sense for developers and owners to use one of the available alternative methods for determining the utility allowance to monetize the building’s improved performance and achieve higher net rents.

Under the LIHTC program, the monthly rent charged for a tax credit apartment equals the gross rent amount minus the amount of any utility allowance(es) for tenant-paid utilities (e.g., electric, gas, water). The computation of LIHTC utility allowances is governed by IRS Regulation 1.42-10 and Notice 2009-44. Read More…