Forty years ago this week, Congress created what many consider the most successful affordable housing production program in American history. The Low-Income Housing Tax Credit (LIHTC), established as part of the Tax Reform Act of 1986 and signed into law by President Ronald Reagan on October 22, 1986, has spent the past four decades transforming the way affordable housing is financed and developed in the United States. Today, it is difficult to imagine the affordable housing industry without it.

Over the last 40 years, LIHTC has financed the construction and rehabilitation of approximately four million affordable homes nationwide, making it the federal government’s primary tool for producing and preserving affordable rental housing. What makes LIHTC remarkable is both its scale and its adaptability. When it was first enacted, the credit was far from a sure thing. Originally authorized as a temporary program, LIHTC has evolved through changing administrations, economic booms and busts, financial crises, tax reform efforts, and even a global pandemic. Yet throughout each of those challenges, it has remained the foundation of affordable housing production across the country.

The program’s success stems from a concept that was groundbreaking at the time and remains powerful today. It allowed for leveraging private capital to achieve a public purpose. Rather than relying exclusively on direct government appropriations, LIHTC created a public-private partnership in which private investors provide equity to affordable housing developments in exchange for tax credits. The result is a financing model that aligns public policy goals with private investment while creating long-term accountability and performance standards. Over the years, the program has continually adapted to meet changing housing needs. The emergence of the 4% tax credit and tax-exempt bond financing dramatically expanded production opportunities. State allocating agencies refined competitive scoring systems to prioritize local housing goals and community needs. Preservation transactions became increasingly important as the industry’s first generation of tax credit properties aged. Policymakers introduced reforms to improve efficiency, expand investor participation, and respond to evolving market conditions.

In California, LIHTC has become the backbone of affordable housing finance. Nearly every affordable housing professional who is a member of CCAH, and many who are not, have experienced firsthand the program’s impact. Developers depend on housing credit equity to fill financing gaps. Investors and syndicators provide critical capital that allows projects to move forward. Lenders, public agencies, architects, contractors, and property managers all play important roles within a financing ecosystem that largely revolves around the credit. The affordable housing developments that define communities throughout California today, from supportive housing developments serving formerly homeless residents to large family communities, senior housing, workforce housing, and preservation projects, often share one thing in common. LIHTC likely played a critical role in making them possible.

The program’s 40th birthday also provides an opportunity to reflect on the challenges that remain. California continues to face an unprecedented housing affordability crisis, construction costs remain elevated, financing structures have become increasingly complex and competition for resources remains intense. Yet despite these challenges, LIHTC remains one of the few housing programs with a proven four-decade track record of delivering results at scale. As we cheer this milestone, it is worth recognizing that millions of Americans have access to safe, stable, affordable housing because of a program that began as a provision in a tax reform bill four decades ago. Few public policies can claim that kind of impact.

Happy 40th birthday, LIHTC. Here’s to the homes built, the communities strengthened, and the millions more households who still depend on its continued success.