Fannie Mae and Freddie Mac will be allowed limited re-entry into the Low-Income Housing Tax Credit (LIHTC) market as equity investors, the Federal Housing Finance Agency (FHFA) announced.
The change is effective immediately.
The LIHTC was established to create affordable housing units in underserved areas throughout the country.
The FHFA’s decision to allow Fannie and Freddie into the market shows a commitment to support affordable housing. Plus, they may provide a countercyclical role in the LIHTC market.
“This decision demonstrates our commitment to supporting affordable rental housing in a controlled and thoughtful manner intended to stabilize the market and not to compete with private investors,” FHFA Director Mel Watt said. “Most of the Enterprises’ investments will be used to facilitate transactions that support underserved markets and complement our Duty to Serve (DTS) priorities.”
Fannie and Freddie will be subject to a $500 million annual investment limit. Any investments above $300 million are required to be in areas that FHFA has identified as markets that struggle attracting investors. The goals of these investments are to preserve affordable housing, support mixed-income housing, and meet other affordable housing objectives.
FHFA reached out to stakeholder to ask of Fannie and Freddie should be allowed to re-enter the LIHTC equity market. The agency will continue to evaluate their participation on an annual basis.