General Glossary
Affordable housing finance terminology used across programs.
General affordable housing finance terminology used across federal, state, and local programs. These are the terms you'll encounter regardless of which specific program you're working with. Looking for program-specific terms? See the Program-Specific Glossary →
Area Median Income (AMI)
The median household income for a metropolitan area or county as determined annually by HUD. AMI is the foundation for nearly every income limit in affordable housing programs. A unit set at '60% AMI' is rent-restricted based on 60% of that area's median income, adjusted for household size. AMI varies dramatically by location — 60% AMI in San Francisco is far higher than 60% AMI in rural Mississippi. Learn how AMI is calculated →
Notice of Funding Availability (NOFA)
A public announcement issued by a federal, state, or local agency announcing that funding is available for a specific program. The NOFA tells potential applicants how much money is available, what it can be used for, who is eligible, when applications are due, and how scoring will work. Also called a NOFO (Notice of Funding Opportunity) depending on the agency. Missing a NOFA window typically means waiting a full year for the next funding cycle.
Capital Stack
The combination of debt, equity, grants, and subordinate financing that funds a real estate project. In affordable housing, capital stacks are notoriously complex because they layer multiple subsidy sources — senior debt, LIHTC equity, soft debt, gap grants, deferred developer fees, and sometimes seller financing. The position of each piece in the stack determines repayment priority and risk.
Gap Financing
The funding required to fill the difference between total project costs and the financing available from senior debt and primary equity. In LIHTC deals, the gap is typically filled with subordinate debt (HOME, HTF, state agency loans), grants (FHLB AHP), or deferred developer fees. Most affordable housing deals require multiple gap sources to close.
Soft Debt
Subordinate loans with below-market interest rates, deferred payment schedules, or payment terms tied to project cash flow. Soft debt sits below senior debt in priority but above equity. Common sources include HOME funds, state housing trust funds, and local subordinate loans. Often forgivable after a long compliance period if affordability requirements are maintained.
PILOT (Payment In Lieu of Taxes)
An agreement between a property owner and a local taxing authority in which the owner pays a reduced or fixed payment instead of standard property taxes. PILOTs are common in affordable housing because they significantly improve project operating economics. PILOT structures vary widely — some are negotiated per project, others follow statutory formulas, and durations range from 15 to 30+ years.
Set-Aside
A reserved portion of program funding or units dedicated to a specific purpose. Examples: a state QAP may include a nonprofit set-aside (minimum 10% of credits reserved for nonprofit developers), a rural set-aside, or a supportive housing set-aside. Within a project, the LIHTC minimum set-aside election determines what percentage of units must be income-restricted.
Eligible Basis
The depreciable basis of a LIHTC project used to calculate the tax credit amount. Eligible basis generally includes hard construction costs, contractor fees, architectural and engineering costs, and certain soft costs — but excludes land, financing costs, marketing, and reserves. The annual LIHTC credit equals the applicable rate (9% or 4%) multiplied by eligible basis multiplied by the applicable fraction of low-income units.
Applicable Fraction
The percentage of a project's eligible basis that qualifies for LIHTC credits, calculated as the lesser of (1) the proportion of low-income units to total units, or (2) the proportion of low-income unit floor space to total floor space. A project that is 100% low-income has an applicable fraction of 1.0. The applicable fraction directly affects the total credit amount.
Placed in Service
The date a LIHTC building is ready and available for its intended use — generally when the certificate of occupancy is issued for the last building in the project. The placed-in-service date triggers the start of the 10-year credit period and the 15-year compliance period. Timing of placed-in-service is one of the most consequential dates in any LIHTC transaction.
Extended Use Agreement
A recorded agreement between a LIHTC owner and the state HFA requiring continued affordability beyond the initial 15-year federal compliance period. State extended use periods typically run 15-30+ years after the initial compliance period, pushing total affordability to 30-45+ years. Extended use agreements are filed in the land records and bind subsequent owners.
Recapture
The IRS process of clawing back previously claimed LIHTC credits when a project fails compliance during the 15-year period. Years 1-10 noncompliance triggers full recapture of all credits claimed plus interest. Years 11-15 trigger pro-rata recapture. Recapture is the primary mechanism that disciplines LIHTC compliance behavior.
Syndicator
A firm that pools tax credit investors and structures partnerships to channel investor equity into LIHTC projects. Syndicators raise funds from corporate investors (typically banks seeking CRA credit), negotiate with developers, perform due diligence, and manage investor reporting throughout the compliance period. Major syndicators include the National Equity Fund, Enterprise, Raymond James, and Boston Capital.
Community Reinvestment Act (CRA)
A 1977 federal law that requires banks to meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods. CRA is the structural foundation of the LIHTC equity market — banks receive CRA credit for LIHTC investments in their assessment areas, which drives the majority of corporate investor demand. CRA regulatory examinations directly influence how much capital banks deploy into affordable housing.
Difficult Development Area (DDA)
A designation made by HUD for areas with high construction, land, or utility costs relative to AMI. LIHTC projects located in a DDA receive a 30% basis boost — meaning eligible basis is increased by 30% for credit calculation purposes. DDAs are redesignated annually by HUD and published in the Federal Register.
Qualified Census Tract (QCT)
A census tract designated by HUD where at least 50% of households have incomes below 60% of AMI or where the poverty rate is at least 25%. LIHTC projects located in QCTs receive a 30% basis boost, identical to DDAs. QCTs are redesignated annually based on updated census and income data.