Basis Boost

What Is a Basis Boost?

A basis boost is an increase in the amount of a project’s cost that can earn Low-Income Housing Tax Credits. Normally, credits are figured on a building’s eligible basis, which is roughly its depreciable development cost, excluding land. A boosted project calculates credits on up to 130% of that figure, so it can receive up to 30% more credit.

The boost is aimed at projects that are harder to finance with rents and ordinary credits alone, either because local costs are high or because the neighborhood is lower-income.

How It Works

A project can qualify in two ways:

• Federal designation. Buildings in a qualified census tract or a difficult development area, both designated annually by HUD, automatically qualify. This applies to both 9% and 4% credit projects.
• State designation. Since the Housing and Economic Recovery Act of 2008, a state housing credit agency may designate any building as needing the boost to be financially feasible. That discretion applies only to credits awarded from the state’s annual ceiling, not to projects financed with tax-exempt bonds. States set the rules in their qualified allocation plans.

For 9% credits, the boost does not create new credits. Each state’s annual supply is capped, so a boost lets the state concentrate more of that fixed supply on particular projects. Credits on bond-financed 4% projects do not count against the cap. In either case, federal law limits a project’s credits to the amount it needs to be feasible.

Example

Suppose a new building has $10 million of eligible basis, every unit is affordable, and it earns the 9% credit, which runs for 10 years.

If investors paid a hypothetical 85 cents per dollar of credit, the boost would raise about $2.3 million more in tax credit equity, reducing the debt or other subsidy the project needs.

Criticisms and Limitations

Because each state’s supply of 9% credits is fixed, every boosted 9% project uses credits that could have gone elsewhere, so the boost can mean fewer total projects.

The automatic federal boost also rewards building in lower-income tracts. The U.S. Supreme Court noted in 2015 that federal law favors putting tax credit housing in low-income areas. Critics say that pattern can reinforce segregation, while supporters say those neighborhoods need the investment.

In 2025, Congress considered adding temporary boosts for rural and tribal areas, but the final version of Public Law 119-21 left them out.