Freddie Mac announced its re-entry into the Low-Income Housing Tax Credit (LIHTC) market. LIHTC, the leading federal program for encouraging the investment of equity in affordable rental housing, will support the creation and preservation of affordable rental housing for low- and very low-income households.

Freddie Mac’s LIHTC investment initiative is designed to provide liquidity and stability to the market. It expects to close its first investment in January 2018.

“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,” David Brickman, executive vice president and head of Freddie Mac multifamily, said in a statement. “Few programs are as mutually beneficial as LIHTC. 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.”

The LIHTC program was created to provide multifamily property owners and investors with an incentive to create and maintain quality affordable housing. Under the program, qualified properties are allocated federal tax credits and investors are able to invest in those properties in order to take advantage of the tax credit. The LIHTC program infuses cash equity into low-income housing properties, which reduces the debt burden for the development of new, or the rehabilitation of existing, affordable properties. As a result, private investors take the risk so U.S. taxpayers do not.

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

The Federal Housing Finance Agency has authorized Freddie Mac to invest in LIHTC equity up to an annual cap of $500 million, subject to certain conditions. Freddie Mac intends to partner with experienced LIHTC syndicators, through which it will invest. The company will focus on markets and property types underserved by other investors.

Freddie Mac Announces Reentry Into Low-Income Housing Tax Credit Market

by Banker & Tradesman time to read: 2 min