FHFA Announces Annual LIHTC Investment Allowance for Fannie Mae and Freddie Mac
On December 21, 2023, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) will each be allowed to invest up to $1 billion annually in the Low-Income Housing Tax Credit (LIHTC) market as equity investors, beginning in 2024. Previously, each Enterprise was limited to $850 million of investment annually in the LIHTC market.
The announcement noted that within the $1 billion investment cap, any investments by the Enterprises 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. The announcement stated that the Enterprises will only make LIHTC investments in projects that waive the qualified contract provision, ensuring the 30-year affordability period envisioned by the LIHTC program.
In addition, the Enterprises will 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. We had mentioned for some time in our HAG briefings and elsewhere that discussions had been ongoing within the Administration about how to best address the housing crisis, and in discussions we had had with the White House economic team, we had also suggested an increase in the investment cap might be warranted.
FHFA Director Sandra L. Thompson noted that since restarting their LIHTC investments in 2018, the Enterprises have furthered their ability to create and preserve affordable housing, especially in areas with difficulty attracting investors. She stated that the announcement provides additional stability for investments in this critical segment of the housing market.
This is welcome news as we continue to work with Congress to provide more resources for affordable housing, specifically by including the reduction of the 50% test and restoration of the 12.5% allocation to the 9% program that expired at the end of 2021. Our hope, and those of our leads on the Hill, is that Congress will introduce a tax bill shortly after their return from the holiday break in January.
We will keep you apprised of these efforts as they come together and wish everyone a very happy and healthy holiday season.