Affordable rental housing development has regained two important sources of financing with the November 16, 2017 announcement by the Federal Housing Finance Agency (FHFA) that Fannie Mae and Freddie Mac will be allowed limited re-entry into the Low Income Housing Tax Credit (LIHTC) market as equity investors. Most of their investments, FHFA director Mel Watt said, will be used to facilitate transactions that support underserved markets and complement their Duty to Serve (DTS) requirements.

The DTS obligation requires Fannie Mae and Freddie Mac to make special efforts to serve three affordable housing priorities: rural housing, affordable housing preservation, and manufactured housing. LIHTC investments can be used to construct new affordable rental housing or to preserve existing rentals.

Fannie Mae and Freddie Mac will be subject to an annual investment limit of $500 million each, less than a 5 percent market share for each. Within this funding cap, any investments above $300 million in a given year are required to be in areas that have been identified by FHFA as markets that have difficulty attracting investors. These investments are designed to preserve affordable housing, support mixed-income housing, provide supportive housing, or meet other affordable housing objectives.

HAC has been among the many stakeholders supporting Fannie Mae and Freddie Mac’s return to the LIHTC investment market.