Affordable housing
Pairing low-income housing tax credits with an FHA-insured loan
Tax credit properties can use FHA-insured 223(f) or 221(d)(4) loans. A LIHTC deal that meets HUD's affordable definition and has rents at least 10% below market sizes at up to 90% of value or cost at a 1.11x coverage, pays the same 0.25% MIP as every program since October 2025, and can use streamlined processing. HUD's LIHTC pilot notices remain posted; their current 2026 operating status is not confirmed.
How HUD treats a tax credit deal
The MAP Guide’s chapter 14 covers LIHTC projects across every program. Standard processing applies with a few changes: all LIHTC deals are underwritten under a single underwriter model by HUD staff trained for tax credit deals; one-stage processing is allowed for tax credit projects under every section, and if a lender chooses two stages no pre-application fee is charged; and streamlined processing, including delayed submission of final plans, is available when conditions are met.
When a LIHTC deal counts as affordable
The MAP Guide (3.1.12) defines affordable housing as a property with LIHTC-level income restrictions, meaning at least 20% of units for households at 50% of area median income or 40% at 60% (including income averaging), recorded for at least 15 years after final endorsement, or one with project-based Section 8 on at least 90% of units and 15 or more years left on the contract. That definition is what qualifies a deal for the higher ratios.
| Deal type | 223(f) max LTV | 221(d)(4) max LTC | Min DSCR | Min vacancy |
|---|---|---|---|---|
| LIHTC with rents at least 10% below market | 90% | 90% | 1.11x | 5% |
| LIHTC without that rent advantage | 87% | 87% | 1.15x | 7% |
| 90% or more of units with rental assistance | 90% | 90% | 1.11x | 3% |
Ratios: ML 2025-03 (January 8, 2025), which raised affordable from 87% to 90% and cut its coverage from 1.15x to 1.11x. Vacancy: MAP Guide Appendix 3. The printed MAP Guide still shows the older figures.
Costs that changed
- MIP. The September 2025 notice set every FHA multifamily program at 0.25% upfront and 0.25% a year for applications on or after October 1, 2025, and eliminated the Affordable and Broadly Affordable MIP categories. A LIHTC deal now pays the same premium as a market-rate one. See HUD MIP.
- Assurance of completion on 223(f). ML 2023-24 removed the extra 10% assurance of completion that 223(f) deals with new LIHTC had to add to the repair escrow, for loans that have a payment and performance bond or letter of credit and a contingency escrow the investor requires and HUD accepts. Repairs still have to be completed, and the lender must make sure total repair cost stays under the 223(f) threshold.
The LIHTC pilot tracks
| Track | Created by | Program | Key features |
|---|---|---|---|
| Tax Credit Pilot | Housing Notice 2012-1 | 223(f) | Separate processing track for 223(f) deals with tax credit equity |
| New Pilot, expedited approval | Housing Notice H 2019-03 | 221(d)(4), 220 | 9% LIHTC new construction (max 65% LTC) and 4% or 9% LIHTC rehab with 90%+ Section 8 (max 75% LTC); goal of firm commitment in 30 days of an acceptable application |
| New Pilot, standard approval | Housing Notice H 2019-03 | 221(d)(4), 220 | 4% or 9% LIHTC rehab without Section 8 (max 75% LTC) and other eligible deals; goal of firm commitment in 60 days |
Under the 2019 notice, both New Pilot tracks aim to close within 60 days of the firm commitment, and only lenders who have closed a LIHTC deal with HUD in the past five years are eligible. The notice originally capped pilot loans at $25 million; a June 2023 HUD production memo removed that cap.
Status: both notices are still posted by HUD, and the 2019 notice says it remains in effect until amended, revoked or superseded. We found no notice ending either track, but we also found no 2024 to 2026 HUD document confirming how the pilots operate today, so we do not state that they are active. Confirm with a MAP lender before planning around pilot timelines.
Structuring points from chapter 14
- Equity bridge loans are allowed, must be non-recourse to the borrower except for surplus cash or residual receipts, and any security for them sits in a separate account labeled as non-project funds, outside the mortgaged property (MAP 14.15).
- Upper-tier transfers. Anyone stepping into the general partner or managing member position, whether by default under the partnership agreement or otherwise, needs HUD approval through the modified TPA process and previous participation clearance.
- Investors. Passive tax credit investors are not controlling participants for previous participation review.
- Section 8. Deals with project-based contracts follow MAP 14.6 on HAP renewals. See Section 8 HAP refinancing.
- Public housing conversions under RAD can combine LIHTC and FHA insurance. See RAD and HUD.
Qualified state housing finance agencies can also insure affordable loans through FHA risk sharing; see risk sharing.
Sources
- HUD MAP Guide, Handbook 4430.G, 2020 edition, section 3.1.12 and chapter 14 (LIHTC and Other Tax Credit Programs)
- HUD Mortgagee Letter 2025-03, Multifamily changes in DSCR and LTV/LTC (Jan. 8, 2025)
- 90 FR 45789, Changes in Mortgage Insurance Premiums for FHA multifamily programs (Sept. 23, 2025)
- HUD Housing Notice H 2019-03, Section 221(d)(4) and 220 LIHTC Pilot Program (Feb. 21, 2019)
- HUD Office of Multifamily Production memo, Removal of $25 million Cap on Loans in the New LIHTC Pilot (June 8, 2023)
- HUD Mortgagee Letter 2023-24, Eliminating the Assurance of Completion on a Section 223(f) with New LIHTC (Dec. 4, 2023)
- HUD Notice H 2023-12, companion to ML 2023-24 (Dec. 4, 2023)
- 24 CFR 200.216, controlling participants (passive tax credit investors excluded)
- HUD multifamily production data and FY2026 production summary
Checked against these sources on October 30, 2026. HUD changes program rules by Mortgagee Letter and Federal Register notice; the lender's commitment governs any loan.
Short answers
Can a LIHTC property get a HUD loan?
Yes. HUD's MAP Guide has a full chapter on tax credit deals, and LIHTC properties use 223(f) for acquisitions, refinances and moderate rehab, and 221(d)(4) for new construction and substantial rehab. HUD's FY2026 production summary counts $1.30 billion of LIHTC loans across 82 projects, not counting risk-share loans.
What LTV does HUD allow on a LIHTC deal?
Up to 90% of value under 223(f), or 90% of cost under 221(d)(4), at a 1.11x debt service coverage, when the property meets HUD's affordable definition and the achievable tax credit rents are at least 10% below market. A tax credit property without that rent advantage is sized like a market-rate deal, at 87% and 1.15x.
Is there still a separate MIP for affordable or LIHTC loans?
No. The 35 basis point Affordable category and the 25 basis point Broadly Affordable category were eliminated by the September 2025 MIP notice. For applications submitted or amended on or after October 1, 2025, LIHTC and market-rate loans alike pay 0.25% upfront and 0.25% a year.
Is the HUD LIHTC pilot program still active in 2026?
We could not confirm it. Housing Notice 2012-1 created the 223(f) tax credit pilot and Housing Notice H 2019-03 added 221(d)(4) and 220 tracks; the 2019 notice says it stays in effect until amended or superseded, and HUD removed its $25 million loan cap in June 2023. We found no HUD notice ending either track, but also no 2024-2026 HUD document confirming current operation. Ask your MAP lender or HUD's production office.
Do tax credit investors have to file HUD previous participation forms?
Passive investors with limited liability in tax credit deals, including syndicators, are excluded from the definition of controlling participants under 24 CFR 200.216, so they do not go through previous participation review. The general partner or managing member and other controlling parties do.