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                        Research and Insights
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                        Increased Annual LIHTC Cap Builds on Fannie Mae's Mission to Support Underserved Markets
    Perspectives Blog
Increased Annual LIHTC Cap Builds on Fannie Mae's Mission to Support Underserved Markets
September 23, 2021
Dana Brown
    Dana Brown
    Vice President, Multifamily Customer Engagement
Senior and disabled residents in Narragansett, RI, will soon get housing with supportive services, while in Greensboro, NC, disabled and homeless residents will have housing tailored for their needs. In Clarkson, NY, senior residents and disabled tenants will have a new housing option where more than a third of a multifamily property's units will be offered to residents earning 30% of area median income or less.

These are all examples of desperately needed housing made possible by the Low-Income Housing Tax Credit (LIHTC) program, which since 1986 has been the most effective way to boost investment in rental units affordable to low-income people and their families.

Thanks to new efforts by the Biden Administration and the Federal Housing Finance Agency, Fannie Mae will be able to further support our efforts to alleviate the shortage of affordable housing for low- and very low-income individuals and families through expanded use of LIHTC investments. Specifically, the Administration increased Fannie Mae's cap for LIHTC investments from $500 million a year to $850 million a year effective immediately.

Since 2018, Fannie Mae's $1.8 billion of LIHTC investments have supported the creation and preservation of thousands of affordable housing units. With the higher cap, we will build on our commitment to address the growing need for quality affordable rental housing.

For those not readily familiar with LIHTC, this federal program provides a tax incentive for investors to support affordable rental housing. It is tailored to serve low-and very low-income households by awarding tax credits to affordable housing developers who enter into partnerships with corporate investors like Fannie Mae that receive the credits in exchange for equity contributions to create and preserve affordable housing. The developers then exchange the tax credits for funding from all manner of investors, from private equity funds, real estate investment funds, and many U.S. corporations, including Fannie Mae. The LIHTC program is a lynchpin in the system that supports affordable rental housing in virtually every community in the United States.

Our LIHTC investments have helped fund Grace Garden in West Fargo, ND, which offers housing to individuals and families, many them formerly homeless and survivors of domestic violence. In rural communities, where seniors struggle to remain as they age, we have supported projects like Traditions at Lafayette in Lafayette, CO, which offers housing for seniors earning up to only 60% of the area median income. In Minneapolis, a property named Mino-Bimaadizwin was developed by the Red Lake Band of Chippewa Indians to provide housing and services for Native Americans and other members of the Minneapolis community.

The past two years have demonstrated how unforeseen events like a pandemic, floods, fires, and economic dislocation can uproot people and bring chaos to their lives. The increase in our annual LIHTC investment cap, part of a broader effort by the White House to shore up the supply of affordable housing in our nation, enables us to continue to play a leadership role in supporting underserved markets and communities, including rural, supportive housing developments, and disaster-impacted areas.

Throughout the last two years when there was tumult in financial markets tied to uncertainty about the pandemic and its impact on the global economy, Fannie Mae continued to make LIHTC investments month after month, assuring our syndicator and developer partners that we are committed to investing in affordable housing. To all those industry participants working with us to create and preserve more affordable housing, we want to reinforce our commitment to help house those most in need: We are here to stay.

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