Extended Use Period

What Is the Extended Use Period?

The extended use period is the full span during which a Low-Income Housing Tax Credit (LIHTC) property must remain affordable. It starts with the 15-year compliance period. It ends on the later of a date the state agency sets in the agreement or 15 years after the compliance period closes. The federal minimum is therefore 30 years.

People often use “extended use period” to mean only years 16 through 30. That is when the state agreement, rather than the threat of IRS credit recapture, keeps the rules in place. The agreement itself goes by different names, such as a land use restriction agreement (LURA) or a declaration of restrictive covenants.

How It Works

No credit is allowed for a year unless an extended low-income housing commitment is in effect at the end of that year. Under Section 42(h)(6), the agreement must:

• Keep the share of affordable units (the applicable fraction) at or above the level promised
• Let income-eligible applicants and tenants, past or present, enforce it in state court
• Prohibit refusing to rent to someone because they hold a Section 8 voucher
• Bind all future owners and be recorded as a restrictive covenant, much like a deed restriction

Many states require longer terms through their allocation plans or award points for them, and some ask owners to waive early-exit rights.

Early Termination

Federal law allows the extended use period to end early in two cases:

1. Foreclosure, unless the Treasury Department finds that the foreclosure was arranged with the owner to escape the restrictions.
2. No buyer at the qualified contract price. After year 14, an owner can ask the state agency to find a buyer who will keep the property affordable, at a price set by a statutory formula based on debt, investor equity, and distributions. If the agency cannot present a qualified contract within one year, the restrictions lift. This route is not available where the agreement or state law is stricter.

Either way, for three years after termination the owner cannot evict existing low-income tenants without good cause or raise their rents beyond what the LIHTC rules allow.

Example

Delaware’s 2025–2026 Qualified Allocation Plan defines the extended use period as the second 15-year period after the compliance period, unless a longer one is chosen, and awards points to applicants who agree to extend it. It also requires applicants to waive the right to request a qualified contract. That closes one of the two federal routes for ending restrictions early.

Why It Matters for Workforce Housing

As tax credit properties reach the end of their restrictions, they can convert to market rents. That is a central concern in preservation work. Longer use periods, qualified contract waivers, and rights of first refusal for tenants, nonprofits, or public agencies are tools used to keep these homes affordable for the workers and families who live in them.