On November 16, 2017 the Federal Housing Finance Agency (“FHFA”) announced that Fannie Mae and Freddie Mac (GSEs) will be allowed a limited re-entry into the Low Income Housing Tax Credit (LIHTC) market as equity investors, effective immediately.
According to the announcement, each GSE will be subject to an annual investment limit of $500 million, less than a 5 percent market share for each. Within this funding cap, any investments above $300 million in a given year are required to be in areas that have been identified by FHFA as markets that have difficulty attracting investors. These investments will be designed to preserve affordable housing, support mixed-income housing, provide supportive housing, or meet other affordable housing objectives.
The LIHTC, established in the Tax Reform Act of 1986, is the primary government program available to address the shortage of affordable rental housing through the creation and preservation of affordable units in underserved areas throughout the country. FHFA’s decision to allow the GSEs to reenter the LIHTC market was a result of its outreach to stakeholders, as part of the GSEs’ duty to serve requirement, and was based on several factors, including: furthering the GSEs’ mission to support affordable housing and ensuring that they could provide a countercyclical role in the LIHTC market in the future if needed. The FHFA stated that it will continue to evaluate the GSEs’ participation in the LIHTC equity market annually.
If you have any questions concerning the GSEs’ reentry to the LIHTC market, please reach out to Solomon Maman.