How LIHTC rents are set, and what you'd actually pay

Tax credit apartments have a published ceiling on rent, and it’s calculated the same way everywhere. Once you know three numbers, your area’s income limit, the unit’s size and the utility allowance, you can work out the most you can be charged.

The formula

From IRC 42(g)(2):

1. Find the unit’s income level. Most units are at 60% of area median income (AMI). Some are at 50%, and in income averaging buildings, anywhere from 20% to 80%.
2. Find the imputed household size. The law assumes 1 person for a studio and 1.5 people for each bedroom: 1.5 for a 1-bedroom, 3 for a 2-bedroom, 4.5 for a 3-bedroom.
3. Look up the income limit for that household size and level. HUD publishes limits for whole household sizes, so 1.5 and 4.5 are averaged from the neighboring sizes.
4. Maximum gross rent = 30% x that income limit / 12.
5. Subtract the utility allowance if you pay any utilities yourself. The result is the most the landlord can charge you in rent.

Worked example

These are illustrative numbers, not any county’s real limits. Suppose the 60% income limits in your county are:

Household size	60% income limit
1 person	$42,000
2 people	$48,000
3 people	$54,000
4 people	$60,000
5 people	$64,800

Unit	Imputed size	Income limit used	Max gross rent (30% / 12)	Utility allowance	Max rent you pay
Studio	1	$42,000	$1,050	$70	$980
1 bedroom	1.5	$45,000 (avg. of 1 and 2)	$1,125	$85	$1,040
2 bedroom	3	$54,000	$1,350	$110	$1,240
3 bedroom	4.5	$62,400 (avg. of 4 and 5)	$1,560	$140	$1,420

Your household size doesn’t change the rent. A single person in a 2-bedroom unit pays the same $1,240 maximum as a family of four in the same unit. What your household size does change is whether you qualify: you must be at or under the income limit for your actual household size. Get your county’s real figures from the income limits pages or run them in the rent calculator.

What a “utility allowance” means for you

If you pay electricity, gas or water yourself, the property must subtract a utility allowance from the maximum rent. The allowance is an estimate of typical utility costs for your unit type, set by a method in Treasury Regulation 1.42-10, often the local housing authority’s schedule. Phone, cable and internet aren’t included. If the property pays all utilities, there’s no allowance and the rent can be the full maximum. More detail: utility allowances.

What you’d actually pay as a share of income

Because the rent is fixed for the unit, it’s a different share of income for different households. Using the 2-bedroom above at $1,240 plus about $110 of utilities ($1,350 total housing cost):

Household income	Housing cost as share of income
$54,000 (at the limit for 3 people)	30%
$40,000	41%
$28,000	58%

That’s why households well below the limit often combine a tax credit apartment with a Housing Choice Voucher, which brings their share back to about 30% of adjusted income. Owners can’t refuse voucher holders (IRC 42(h)(6)(B)(iv)). See LIHTC vs Section 8.

Why rents change each year

• New income limits. HUD publishes Multifamily Tax Subsidy Project (MTSP) income limits each year. The FY2026 limit files are dated March 27, 2026, and HUD published them May 1, 2026 (HUD USER). When limits rise, maximum rents rise.
• Hold harmless. For projects already in service, HUD’s MTSP limits generally don’t drop below the prior year’s levels, so a bad year for local incomes doesn’t force rents down.
• Utility allowance updates. Owners review allowances at least once a year; a higher allowance means lower rent to you.
• Your lease. Increases happen at renewal or as your lease allows, and state or local rent rules may add limits.

The gross rent floor

Rents can also be protected from falling. Under Rev. Proc. 94-57, the IRS treats a building’s gross rent floor as taking effect on the date the agency first allocates credit to it, unless the owner designates the placed-in-service date instead, by the placed-in-service date. For bond-financed buildings, the floor takes effect when the agency first issues its determination letter, again unless the owner designates the placed-in-service date (Rev. Proc. 94-57, 1994-2 C.B. 744; a secondary summary is in the California TCAC compliance manual). If HUD’s published limits later fall below the floor, the property can keep charging up to the floor. For renters that means rents rarely go down when area incomes dip; for owners it’s a protection lenders count on.

Rent increases on renewal

LIHTC sets a ceiling, not a schedule. When HUD’s limits rise, the ceiling rises, but a property that was charging below the old maximum doesn’t have to raise rents, and one at the maximum can raise them only within your lease and any state or local rules. If you have a voucher, your share is set by the voucher program, and the increase is mostly paid by the housing authority if the new rent stays within its payment standard. Ask the property in writing which income level your unit is set at; it determines your ceiling every year you live there.

Rents in rural areas

In rural areas as defined by USDA, income limits are based on the greater of the area median or the national non-metropolitan median (IRC 42(i)(8)), which raises limits and rents in low-income rural counties.

Check before you sign

1. Ask which income level your unit is set at (for example, 60% AMI).
2. Ask for the current maximum rent and the utility allowance the property uses.
3. Ask which fees are mandatory.
4. Confirm your income qualifies for your household size: Am I eligible?
5. Find properties near you on the tax credit apartments pages.

If you think you’re being charged more than the maximum, contact the state housing finance agency that monitors the property. Its contact is on your state page.