The Federal Housing Finance Agency (FHFA) have announced that Fannie Mae and Freddie Mac will each be allowed to invest up to $1 billion annually in the Low-Income Housing Tax Credit (LIHTC) [1] market as equity investors, beginning in 2024. The government-sponsored enterprises (GSEs) will also adjust their LIHTC investment policies to ensure their investments only support projects that remain affordable for the entire 30-year period intended by the program.
“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,” said FHFA Director Sandra L. Thompson [2]. “Today's announcement provides additional stability for investments in this critical segment of the housing market.”
Within the $1 billion investment cap, any investments by the GSEs above $500 million in a given year must be in transactions FHFA has identified as having difficulty attracting investors. This increases the amount of investments under the cap 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. In addition, the GSEs will only make LIHTC investments in projects that waive the qualified contract provision, ensuring the 30-year affordability period envisioned by the LIHTC program.
Created by the Tax Reform Act of 1986, the LIHTC program gives State and local LIHTC-allocating agencies the equivalent of approximately $9 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households.
The U.S. Department of Housing & Urban Development (HUD) collects LIHTC data at the property level and the tenant level. HUD's property database includes information on the size, unit mix, and location of individual projects. HUD’s collection of tenant information includes demographic and economic characteristics of households residing in LIHTC properties from state housing finance agencies that administer the LIHTC program. This page provides access to the property and tenant level data and also to data on Qualified Census Tracts and Difficult Development Areas designated by HUD.
Previously, each GSE was limited to $850 million of investment annually in the LIHTC market. Increasing the Enterprises’ LIHTC investment cap ensures they continue to play a consistent role in supporting the creation and preservation of affordable housing.
The LIHTC is the primary federal government program available to address the shortage of affordable rental housing by creating and preserving affordable units in underserved areas throughout the country. FHFA will continue to evaluate the GSEs' participation in the LIHTC equity market on an ongoing basis.