The Federal Housing Finance Agency (FHFA) recently announced
an increase in the annual investment cap for the government-sponsored
enterprises (GSEs) for the Low-Income Housing Tax Credit (LIHTC) market.
Beginning this year, Fannie Mae and Freddie Mac will be allowed to invest up to
$1 billion each as equity investors.
Previously, the GSEs were limited to $850 million each for
annual LIHTC investments. By increasing the cap, the FHFA seeks to ensure
Fannie Mae and Freddie Mac continue to play a consistent role in supporting the
creation and preservation of affordable housing, according to an agency press
release.
The GSEs also will adjust their LIHTC investment policies to
ensure these funds only go toward supporting projects designed to 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,” FHFA Director
Sandra Thompson said in the release. “Today’s announcement provides additional
stability for investments in this critical segment of the housing market.”
The LIHTC is the primary federal government program designed
to address the shortage of affordable available rental housing by creating and
preserving affordable units in underserved areas throughout the country. The FHFA
said it will continue to evaluate the GSEs’ participation in the LIHTC equity
market indefinitely.
Any GSE investment exceeding $500 million in a given year must
be put toward projects specifically identified by FHFA as needing to draw in
more investors. This requirement is intended to drive up the number of
investments under the cap required to support housing in rural areas qualifying
for the agency’s “duty to serve” designation. It also is intended to help
preserve, support and/or provide affordable housing, mixed-income housing,
supportive housing or meet other affordable housing objectives.
The GSEs may only invest in LIHTC projects in which the
qualified contract provision is waived. This requirement is intended to ensure the
30-year affordability period envisioned by the LIHTC program is met.