LIHTC Program Year 15: What Not-for-Profit Sponsors Need to Know

A meaningful number of affordable housing developments financed through the Low-Income Housing Tax Credit (LIHTC) program are reaching their Year 15 milestone in 2026 and over the next several years. Many of these properties were placed in service during a period of especially high LIHTC production in the mid-2010s, which means a wave of not-for-profit sponsors across the affordable housing industry are approaching this decision point at roughly the same time. For sponsors whose mission is tied to the property itself, not just the tax benefit, this moment deserves more than a standard exit analysis.

Year 15 marks the end of the mandatory 15-year compliance period, after which noncompliance can no longer trigger credit recapture. It doesn't automatically end the property's affordability restrictions, though. Most LIHTC properties remain subject to an extended use agreement running 30 years from the placed-in-service date, so what actually opens up at Year 15 is a range of paths for addressing that longer-term restriction. Partners might continue operating under the existing structure, refinance and resyndicate the property, pursue a qualified contract request to exit the restriction early, or, in the case of many not-for-profit sponsors, exercise a right of first refusal (ROFR) to acquire the property outright. Which path makes sense depends heavily on the property's condition, the original partnership agreement, and what the sponsor actually wants out of the next chapter.

It's worth noting that Year 15 is a milestone, not a deadline that forces immediate action. Many partnerships continue operating under the same structure well past Year 15 simply because no one has raised the question of what comes next. That default can work out fine, but it can also mean a sponsor misses a window when its negotiating position was strongest, particularly if a ROFR or other exit tool has its own practical timing considerations.

The analysis looks meaningfully different depending on who is sitting across the table. For-profit limited partners generally treat the deal as a tax credit investment with a defined horizon. Once that horizon ends, many are open to a straightforward sale, negotiating exit value on market terms and facing a mix of capital gains and depreciation-recapture income, some of it taxed at ordinary rates. Not-for-profit sponsors usually have a different relationship with the property from the start. They weigh long-term affordability and mission alignment alongside the numbers, and frequently work to acquire and retain the property rather than exit it, often through a legal tool for-profit partners simply don't have.

That right of first refusal, where it exists, is one of the more consequential tools available to a not-for-profit sponsor. Under Section 42(i)(7), a qualified not-for-profit or government entity holding a ROFR can acquire the property at a statutorily defined minimum price, often well below fair market value, rather than compete on open market terms. Whether a given partnership agreement actually grants this right, and how it's structured, varies enough that it needs to be confirmed directly rather than assumed.

For syndicators and for-profit partners in these deals, understanding this dynamic matters just as much. A not-for-profit co-sponsor's Year 15 priorities can shape deal timing, valuation expectations, and exit structure long before the compliance period formally ends. Factoring those priorities into the deal structure from the outset avoids renegotiating terms that were built around different assumptions.

Even where the numbers might favor a sale, many not-for-profit boards weigh a different question first: does continued affordability at this property still serve the organization's mission? That's a legitimate factor in the decision, not a distraction from it. It works best, though, when paired with a clear-eyed look at the tax and financial mechanics, so the mission-driven choice is also a sustainable one.

As Year 15 approaches, coordination with the syndicator partner becomes its own workstream. Timing matters: initiating the conversation too late can limit negotiating leverage, while starting early gives both sides room to work through valuation and structure before positions harden. Valuation itself can be a point of real disagreement, particularly where a ROFR minimum price and a syndicator's view of fair market value diverge. Coming in with an independent read on the numbers, rather than relying solely on the syndicator's figures, gives the sponsor a stronger footing in that conversation.

Year 15 and right of first refusal mechanics vary by state housing finance agency and by the specific language in each partnership agreement, so general guidance can only go so far. CSH works with not-for-profit boards on Year 15 exit planning, ROFR structuring support, and not-for-profit tax advisory, starting with a direct review of your actual partnership agreement rather than assumptions drawn from a typical deal.

If your organization has properties approaching Year 15 in the next few years, the board conversation is worth having now, while there's still time to evaluate every option rather than default into whichever one is left.