Section 42 housing refers to affordable rental housing developed under Section 42 of the Internal Revenue Code, also known as the Low-Income Housing Tax Credit (LIHTC) program. This program provides tax credits to developers who build or renovate rental housing and agree to rent a portion of the units to low-income tenants at below-market rates for a set period, typically at least 15 years

. Key features of Section 42 housing include:

• Tax Credit Incentive: Instead of direct rental subsidies, developers receive federal tax credits that help offset construction or rehabilitation costs, making affordable housing projects financially viable

• Income and Rent Restrictions: A certain percentage of units must be rented to tenants earning at or below specified income limits, often 40-60% of the area median income (AMI). Rents are set at affordable levels based on these income limits and do not fluctuate with tenant income during the lease term

• Eligibility: Tenants must meet income qualifications relative to the AMI and comply with other rules such as household size and student status. Applicants apply directly to the property management, not through public housing authorities

• Program Administration: State Housing Agencies oversee compliance, ensuring properties maintain income and rent restrictions and meet quality standards

• Differences from Section 8: Unlike Section 8, which provides direct rental assistance and adjusts rent based on tenant income, Section 42 offers tax credits to developers, with fixed affordable rents that do not change with tenant income fluctuations

In summary, Section 42 housing is a federally incentivized affordable housing program that uses tax credits to encourage developers to provide rental units affordable to low-income households, with eligibility and rent limits set according to area median income guidelines. Tenants apply directly to these properties and benefit from stable, below-market rents without direct government rental subsidies.