What Does LURA Stand For in Real Estate?

In real estate, LURA stands for Land Use Restriction Agreement. It is a legally binding covenant recorded against a property that has received federal Low-Income Housing Tax Credits (LIHTC), and it locks the property into affordability requirements for at least 30 years — capping rents and reserving a share of units for tenants below set income thresholds.¹

The federal statute calls the same document an “extended low-income housing commitment,” and developers sometimes refer to it as the regulatory agreement or extended use agreement. At the county recorder’s office, though, the recorded instrument is almost always labeled the LURA.

How a LURA Binds the Property

A LURA is recorded as a restrictive covenant under state law, which means it attaches to the title the way an easement or lien would. Anyone running a title search will find it. Because it runs with the land, the restrictions survive a sale: every future owner inherits the same obligations until the agreement expires. The federal statute specifically requires the agreement to bind all successors of the original owner.¹

The LURA also gives low-income tenants a direct right to enforce its terms in state court. That is an unusual feature for a real estate covenant. A tenant who believes the landlord is charging too much rent or renting to households above the income limit can sue to enforce the agreement without waiting for a government agency to act.¹

The agreement itself is between the property owner and the state housing credit agency. State housing finance agencies administer LIHTC at the state level, allocate the credits through a competitive process, and monitor compliance with the LURA over its full term.²

What the LURA Actually Requires

Every LIHTC property has to meet one of three minimum set-aside tests, and the LURA locks in whichever test the developer chose. The election is permanent.¹

The 20-50 test: at least 20% of the units are rent-restricted and occupied by households earning no more than 50% of area median gross income (AMI).
The 40-60 test: at least 40% of the units are rent-restricted and occupied by households earning no more than 60% of AMI. This is the most commonly elected option.
The average income test: at least 40% of the units are rent-restricted and occupied by income-qualified households, with individual units serving tenants anywhere from 20% to 80% of AMI, as long as the average across designated units stays at or below 60% of AMI.

Congress added the average income test in 2018, which gives developers room to serve a wider mix of incomes in the same building, including moderate-income households up to 80% of AMI.¹

How Rent Is Capped

LIHTC rents are not tied to what a particular tenant earns. The maximum rent for a unit is set at 30% of the applicable income limit for that unit, adjusted for bedroom count. A two-bedroom unit, for example, assumes occupancy of three people (1.5 persons per bedroom), and rent is capped at 30% of the income threshold for a household that size. If tenants pay their own utilities, the landlord has to subtract a utility allowance, which lowers the rent the landlord can actually charge.

The result is that LIHTC rents sit well below market in expensive metros and closer to market in lower-cost areas. A tenant earning less than the income limit may still spend more than 30% of their own paycheck on rent, because the cap is pegged to the AMI threshold, not the individual tenant’s income.

Tenant Eligibility and Vouchers

Property managers verify each household’s income and family size at move-in and recertify annually. If a tenant’s income rises after move-in, the unit generally stays in compliance as long as the income does not exceed 140% of the applicable limit. The LURA also prohibits owners from refusing to rent to tenants holding Section 8 housing choice vouchers solely because of voucher status.¹

How Long a LURA Lasts

A LURA covers two consecutive periods that together run at least 30 years.

The first 15 years are the compliance period. The owner claims tax credits (spread over 10 years) and must meet every LIHTC requirement. If the building’s qualified basis drops during this window because units fall out of compliance, the IRS can recapture credits already claimed, plus interest. That recapture risk falls on the investors who bought the credits, which is why syndicators and limited partners pay close attention during these years.¹

After year 15, the extended use period begins and runs at least another 15 years. Many state agencies require longer terms, pushing total affordability commitments to 40 or 50 years. Recapture risk is gone, but the rent and income restrictions in the LURA remain fully enforceable, and the owner continues reporting to the state agency.¹³

Buying, Selling, or Foreclosing on a LURA Property

Since the LURA is recorded and binds all successors, a buyer inherits every restriction in the agreement: income limits, rent caps, unit set-asides, and voucher acceptance, all for the remaining term. That is true whether the sale is voluntary or involuntary. A buyer who misses the LURA during due diligence is still bound by it.¹

The statute also prohibits selling only part of a building that is subject to an extended use agreement. If the LURA covers the whole building, the whole building has to go to the same buyer.

Foreclosure is one of the few events that can end a LURA early. When a building is acquired through foreclosure or a deed in lieu, the extended use period ends on the acquisition date. The IRS can challenge the result if it determines the foreclosure was arranged between the owner and lender specifically to kill the affordability restrictions. Even when foreclosure does terminate the LURA, existing low-income tenants are protected for three years: they cannot be evicted except for good cause, and rents cannot rise above the levels that would otherwise apply under the LIHTC program.¹

Exiting Early Through a Qualified Contract

An owner who wants out before the LURA expires can use the qualified contract process. After the 14th year of the compliance period, the owner submits a written request asking the state housing agency to find a buyer who will keep the property affordable. The agency then has one year to produce a qualified contract.¹

The price for the low-income portion of the building is set by a statutory formula based on outstanding debt, adjusted investor equity, and other capital contributions, minus cash distributions. If the agency cannot find a buyer at that price within the year, the extended use period ends. The same three-year tenant protection that applies after foreclosure applies here. After those three years, units can convert to market rate. Some states impose stricter rules that override the federal qualified contract option, making early exits harder or impossible in those jurisdictions.

What Happens When the LURA Finally Expires

When the full term runs out, the affordability restrictions lift. The owner no longer has to cap rents, screen for income, or accept housing choice vouchers. Every restricted unit could, in principle, convert to market rate.

A HUD study of properties reaching the end of their restrictions found three common paths: some keep operating as affordable housing because the owner is mission-driven or the local market will not support higher rents; some are recapitalized with new public subsidies that bring fresh affordability restrictions; and some reposition to market rate or convert to a different use. The study found the balance shifts toward market-rate conversion after year 30, particularly in high-cost markets where the gap between LIHTC rents and market rents is large.⁴

For tenants living in a property when the LURA reaches its natural expiration, federal law does not require the three-year protection period that applies after a foreclosure or a qualified contract termination. Tenant protections at that point depend on state and local law, lease terms, and the notice requirements that apply to rent increases in the jurisdiction. If you rent in a LIHTC property, the expiration date on the recorded LURA is worth knowing well in advance.

1
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
2
eCFR. 26 CFR 1.42-5 – Monitoring Compliance With Low-Income Housing Credit Requirements
3
U.S. Department of Housing and Urban Development. What Happens to Low-Income Housing Tax Credit Properties at Year 15 and Beyond
4
U.S. Department of Housing and Urban Development. What Happens to Low-Income Housing Tax Credit Properties at Year 15 and Beyond