On December 21, 2023 the Federal Housing Finance Agency (FHFA) announced that the Government-Sponsored Enterprises (the Enterprises) Fannie Mae and Freddie Mac will each be allowed to invest up to $1 billion annually, or $2 billion in total, in the Low-Income Housing Tax Credit (Housing Credit) market as equity investors, starting in 2024. This investment cap is an increase from the previous limit of $850 million each, or $1.7 billion in total. FHFA also announced that the Enterprises will only make Housing Credit investments in developments that waive the qualified contract option.
FHFA’s announcement also states that with the new $1 billion investment limit, any investments by the Enterprises over $500 million in a given year must be in developments that FHFA has identified as having difficulty attracting investors. This is intended to increase the amount of investments under the cap that must support housing in Duty to Serve-designated rural areas, preserve affordable housing, support mixed-income housing, provide supportive housing, or meet other affordable housing objectives.
“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 L. Thompson in the press release. “Today’s announcement provides additional stability for investments in this critical segment of the housing market.”
After reentering the Housing Credit equity investment market in 2018, the GSEs’ investment caps have doubled in size. The caps were initially set at $500 million each, then raised to $850 million each in September 2021 as part of an initiative to support the Biden-Harris Administration’s Build Back Better Agenda.