Fannie Mae, Freddie Mac Will Re-Enter LIHTC Market
The Federal Housing Finance Agency will allow Fannie Mae and Freddie Mac limited re-entry into the Low-Income Housing Tax Credit market as equity investors effective immediately, the agency said.
The LIHTC–established in the Tax Reform Act of 1986–is the primary government program available to address affordable rental housing shortages.
FHFA based its decision on several factors, including furthering the enterprises’ mission to support affordable housing and ensuring that they could provide a countercyclical role in the LIHTC market in the future if needed.
“This decision demonstrates our commitment to supporting affordable rental housing in a controlled and thoughtful manner intended to stabilize the market and not to compete with private investors,” FHFA Director Mel Watt said. “Most of the enterprises’ investments will be used to facilitate transactions that support underserved markets and complement our Duty to Serve priorities.”
Freddie Mac Multifamily Executive Vice President David Brickman said few programs are as “mutually beneficial” as the LIHTC. “It incentivizes private investment in affordable housing, delivers much-needed cash equity to owners of affordable properties and–most importantly–encourages the development and preservation of critical affordable housing in underserved areas throughout the country,” he said.
Each enterprise will be subject to a $500 million annual investment limit–less than a 5 percent market share for each, FHFA said. Within this funding cap, any investments above $300 million in a given year must be in areas FHFA identifies as markets with difficulty attracting investors.
Since its inception, the LIHTC program has built nearly 3 million apartment units that house more than 6.5 million low-income families. It currently finances construction and rehabilitation of nearly all subsidized housing in the U.S. Nearly 90,000 apartment units are built each year using the LIHTC.
Fannie Mae Multifamily Executive Vice President Jeffery Hayward said Fannie Mae’s renewed participation will support the LIHTC market “by providing a reliable source of capital and a stabilizing influence on affordable housing throughout diverse economic markets and cycles.”