Affordable Housing Financing Guide

4% LIHTC and Tax-Exempt Bond Financing

The 4% credit is non-competitive: any project financed with qualifying tax-exempt private activity bonds automatically receives it, no scoring round, no allocation calendar. That makes it the default vehicle for larger affordable deals, $20M and up in total development cost, where the bond issuance overhead is easily absorbed and the certainty of non-competitive credit outweighs the smaller roughly 30% of TDC in equity it delivers versus the 9% credit's 70%.

Typical Deal Size$20M to $80M+ total development cost
Credit EquityApproximately 30% of total development cost
Affordability Covenant55 years
Compliance MonitoringTCAC and bond issuer compliance
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The Capital Stack

Most 4% LIHTC + Bonds deals layer several sources rather than a single loan:

Why size drives the 4% versus 9% decision

The math is straightforward: 4% credit equity covers roughly 30% of total development cost, so the remaining 70% has to come from permanent debt, soft financing, and sponsor equity. On a $10M deal that gap is manageable. On a $40M deal it usually isn't, unless the sponsor can absorb non-competitive certainty over deeper equity. That's why 4% and bonds becomes the default once a deal clears roughly $20M, and why we run the 4% versus 9% comparison on every affordable deal before picking a structure.

The bond issuer relationship matters as much as the lender

Because the 4% credit is coupled to bond financing, the real gating relationship on these deals is often the bond issuer, not the construction lender. Issuers allocate private activity bond cap annually and have their own underwriting calendar independent of the construction loan closing. We coordinate the issuer, the bond counsel, the LIHTC investor, and the construction lender to one closing date rather than letting any one party's calendar become the critical path.

For the full program mechanics, see our deeper guide: Program Deep Dive →

Where We're Active

4% LIHTC + Bonds Financing, By Market

Local financing guides for the markets where we're actively tracking 4% LIHTC + Bonds deal flow.

Los Angeles

4% LIHTC and Tax-Exempt Bond Financing in Los Angeles.

View local financing guide →
San Jose

4% LIHTC and Tax-Exempt Bond Financing in San Jose.

View local financing guide →

Frequently Asked Questions

Is there a practical minimum deal size for 4% and bonds?

Yes, roughly $15M in total development cost. Bond issuance carries fixed costs, legal, issuer fees, credit enhancement, that don't scale down well, so deals smaller than that usually pencil better under the 9% credit instead.

Does 4% credit equity require a competitive scoring round?

No. That's the whole point of the 4% credit, it's automatic once the deal qualifies for tax-exempt bond financing. The gating constraint is the bond issuer's private activity bond cap allocation, not a competitive scoring process.

What's the affordability covenant length?

55 years is the standard LIHTC baseline, and most bond issuers require it as well. Some state and local soft-debt sources layer a longer covenant on top.

Can a 4% deal also use HUD 221(d)(4) financing?

Yes, and it's a common pairing on larger deals. The HUD-insured first mortgage and the tax-exempt bond can often close through the same MAP lender in a single-close structure, which simplifies the capital stack considerably versus coordinating a separate bond issuer and construction lender.

Have a 4% LIHTC + Bonds deal?

Send us the site, the program you're targeting, and where it stands today. We'll come back within 24 hours with the lenders who actually close this structure and the stack we'd recommend.

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