State Housing Tax Credit
An additional layer of equity for affordable housing in Texas, designed to help developments close funding gaps and expand feasibility.
Overview
The Texas State Housing Tax Credit, created in 2023, expands the state’s ability to support affordable housing by providing an additional layer of equity alongside the federal Housing Credit. With approximately $25 million allocated annually, the program is designed to increase the financial feasibility of developments that may otherwise struggle to close funding gaps.
State credits function similarly to the federal Housing Credit, allowing developers to attract private investment in exchange for tax benefits. When combined, federal and state credits can significantly increase the funding available for affordable housing development, particularly in high-cost or underserved markets.
How the program is taking shape in Texas
Initially incorporated into the 2024 Qualified Allocation Plan (QAP) and supporting materials, the state housing tax credit is designed to supplement federal housing credit awards and expand financing options for affordable multifamily housing. Applicants must complete the designated state housing tax credit forms and follow the Multifamily Application Procedures Manual and Carryover Allocation processes. Once the Texas Department of Housing and Community Affairs (TDHCA) awards federal housing tax credits in its annual cycle, the department selects the developments with the strongest applications to allocate the limited state housing credits. Selected developments can receive up to the same amount of federal housing tax credits allocated in that same year.
Why it matters
For deals facing rising costs and thin margins, an additional state credit can make the difference between a development that pencils out and one that does not move forward.
State Housing Tax Credits Serve an Important Role to Provide Additional Funding Necessary for Deal Feasibility
Used in tandem with federal housing credit awards allocated by the Texas Department of Housing and Community Affairs (TDHCA), this funding source prioritizes developments that meet the deepest affordability guidelines set by the TDHCA Board.