The Federal Housing Finance Agency (FHFA) increased the amount the Enterprises (Fannie Mae and Freddie Mac) can invest in the low-income housing tax credit (LIHTC) market. Beginning in 2024, the Enterprises can each invest up to $1 billion annually as equity investments. Along with this increase was a stipulation that the Enterprises must adjust their LIHTC investment policies to ensure the investments support projects that will remain affordable for the entire 30-year period intended by the program.
Before the increase, the Enterprises were limited to $850 million in investments in the LIHTC market on an annual basis. Now with the $1 billion investment cap, any Enterprise investment above $500 million in a given year must be in transactions that have been identified by the FHFA as having difficulty attracting investors.
The new cap also increased the amount of investments that must support housing in Duty-to-Serve-designated rural areas, preserve affordable housing, support mixed-income housing, provide supportive housing, or meet other affordable housing objectives. Moreover, the Enterprises will only make LIHTC investments in projects that waive the qualified contract provision, which ensures the 30-year affordability period.
“Since restarting their LIHTC investments in 2018, the Enterprises have furthered their ability to create and preserve affordable housing, especially in areas that have difficulty attracting investors,” FHFA Director Sandra Thompson said in a release. “Today’s announcement provides additional stability for investments in this critical segment of the housing market.”
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