Fannie Mae and Freddie Mac’s Investment Cap for LIHTC Nearly Doubled to $1.7 Billion
Today, as a part of the Build Back Better agenda, the Biden administration announced major steps to increase and preserve the nation’s affordable housing stock by approximately 100,000 homes over the next three years. Today’s announcement also includes the reinstatement of Treasury Department’s Federal Financing Bank (FFB) and the Department of Housing and Urban Development (HUD) Risk-Sharing Program, and an increase in the Low-Income Housing Tax Credit (LIHTC) investment cap available to Fannie Mae and Freddie Mac to $1.7 billion (or $850 million each). The Duty to Serve rural/targeted investment requirements will increase from 40% to 50%, and additional funding for CDFIs and nonprofits through the Capital Magnet Fund will be provided.
The National Low-Income Housing Coalition estimates that there is a shortage of 8.7 million units of rental housing. Over the last several decades, our members and public housing authorities (PHAs) around the country have been on the front lines to witness the damaging effects of a lack of overall funding and investment in affordable and public housing.
CLPHA will continue to advocate for every financing tool to be available to PHAs to build additional affordable housing, including the SAVE Act, which increases the capacity for PHAs to leverage private activity bonds (PABs) by exempting them from the PAB cap.
Highlights from this announcement include:
- Reinstating the FFB Risk-Sharing Program
- Suspended in 2019 by the previous administration, this program will allow state and local housing finance agencies (HFAs) to provide efficient, low-cost loans for the development of affordable housing.
- Increasing LIHTC Investment Cap
Currently, Fannie and Freddie Mac are permitted to invest up to $1 billion per year (or $500 million each) in affordable housing development and preservation supported by low-income housing tax credits. With this change, Fannie Mae and Freddie Mac will be permitted to invest up to $1.7 billion (or $850 million each). This will come with a 10% (currently capped at 40%) increase in Duty to Serve rural/targeted investment requirements.
- The Treasury Department will soon be releasing a notice encouraging that funding through the Capital Magnet Fund be utilized for the production of affordable housing.
- Boosting the Supply of Manufactured Homes and 2-4 Unit Properties
- The administration is encouraging state and local governments to reduce zoning and financing barriers to increase production of manufactured homes and 2-4 unit properties, particularly in low-to-moderate income communities and communities of color. In addition, federal agencies are taking steps to increase financing options for these types of properties.