The Federal Housing Finance Agency will raise its cap for investments government-sponsored enterprises Fannie Mae and Freddie Mac can make in certain tax credits used to fund affordable housing in 2024.
That limit for Low Income Housing Tax Credits will be raised to $1 billion annually from $850 million for each enterprise, with the provision that any amounts above $500 million will need to be allocated to regions where investment is scarce.
FHFA also is requiring that the credits preserve affordability for a full 30 years as intended. It will not allow the qualified contract exception to that rule, which allows an opt-out after 15 years, and will, instead, require a waiver to that effect. Some affordable housing advocates like the National Council of State Housing Agencies, have called the qualified contract exception a "loophole."
"Since restarting their LIHTC investments in 2018, the enterprises have furthered their ability to create and preserve affordable housing especially in areas that have difficulty attracting investors," said FHFA Director Sandra Thompson in a press release. "Today's announcement provides additional stability for investments in this critical segment of the housing market."
The agency also said in the release that it would "continue to evaluate the enterprises' participation in the LIHTC program on an ongoing basis."
Fannie and Freddie originally exited the LIHTC market in 2008 when they went into government conservatorship. When they re-entered the market 10 years later, they started with investments capped at $500 million each, with $300 million allocated to places where investment is scarce.
