Fannie, Freddie re-enter low income housing tax credit market

Encourages investment in rental housing

Mortgage giants Fannie Mae and Freddie Mac announced they are now re-entering the Low Income Housing Tax Credit market, the federal program which encourages invement of equity into affordable rental housing.

Freddie Mac explained that under the program, qualified properties are allocated federal tax credits and investors are able to invest in those properties to take advantage of those tax credits.

The program infuses cash equity into low-income housing properties, reducing the debt burden for the development or rehabilitation of affordable properties. Under this plan, investors take the risk, rather than taxpayers, Freddie Mac announced.

“We are excited to resume investing in Low-Income Housing Tax Credits, which will expand our affordable housing efforts and help provide stability to this market,” said David Brickman, executive vice president and head of Freddie Mac Multifamily.

“Few programs are as mutually beneficial as LIHTC,” Brickman said. “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.”

Fannie Mae announced the Federal Housing Finance Agency approved its re-entry into the market effective immediately. Fannie announced it hopes to improve affordable housing stock to help markets in most need of support.

“We are thrilled to announce our re-entry into the LIHTC market,” said Jeffery Hayward, Fannie Mae executive vice president of multifamily. “The LIHTC program has long been the most effective tool at driving housing supply for low- and very low-income families.”

“Fannie Mae’s renewed participation in these business activities 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,” Hayward said. “This is a significant step forward for Fannie Mae to better serve the multifamily market and play an integral role in addressing America’s affordable housing crisis.”

Increasingly, the housing industry has shown its support for helping low-income households afford homes. In fact, last week, approximately 2,500 signers sent a letter to Congress, addressed to Speaker of the House Paul Ryan and Senate Majority leader Mitch McConnell, urging them to direct savings from the MID cut to rental housing programs that serve the lowest income families such as the national Housing Trust Fund or a renter’s tax credit.

Fannie Mae explained the LIHTC program built nearly 3 million apartment units, housed 6.7 million low-income families and currently finances the construction of almost all subsidized housing in the U.S. About 90,000 apartment units are built each year through the program.

“We look forward to expanding the productive relationships we have with key partners in the LIHTC industry and enhancing our product line to offer equity financing solutions to support the ongoing needs of the market,” said Dana Brown, director of multifamily customer engagement and program lead for Fannie Mae LIHTC investment activities. “We are ready to hit the ground running and we look forward to expanding our relationships and forming new partnerships.”

Freddie Mac explain this will support the creation and preservation of affordable rental housing for low and very low income households. It said its investment into the LIHTC market will provide liquidity and stability to the housing market, and expects to close its first investment in January 2018.

“Our LIHTC investment initiative will focus on affordable housing preservation, rural housing, markets with uneven or unpredictable liquidity, and other underserved areas that have been identified in our Duty to Serve plan,” said David Leopold, vice president of targeted affordable sales and investments at Freddie Mac Multifamily.

“Doing so will have a significant positive impact on communities with some of the most serious affordable housing needs,” Leopold said. “Ultimately, we seek to provide better access to investment capital for developers, particularly those operating in underserved areas that are overlooked by other investors.”

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