Fannie, Freddie Invested More than $1.7B in LIHTC Equity in 2023

And the investment cap increased this year.

The Federal Housing Finance Agency (FHFA) recently released its annual Housing Mission Report. An independent agency established by the Housing and Economic Recovery Act of 2008 (HERA), the FHFA is responsible for the effective supervision, regulation, and housing mission oversight of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), and the Federal Home Loan Bank System, which includes the 11 Federal Home Loan Banks (FHLBanks) and the Office of Finance (OF).

According to the report, Fannie Mae and Freddie Mac invested more than $1.7 billion in LIHTC equity in 2023. These investments came about due to the Duty to Serve Underserved Markets rule required by HERA. The rule directs Fannie Mae and Freddie Mac to improve access to mortgage financing for those of modest means in three housing markets posing persistent challenges: manufactured housing, affordable housing preservation, and rural housing.

In 2023, Fannie Mae and Freddie Mac were authorized to invest up to $850 million each in the LIHTC market as equity investors. Any investments above $425 million were required to be in areas that have been identified by FHFA as having difficulty attracting investors. Such transactions either 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. According to the report, more than 90 percent, or $1.6 billion, of the Freddie Mac and Fannie Mae’s LIHTC investments were made in targeted transactions, meaning investments that either support housing in Duty to Serve-designated rural areas or meet other affordable housing objectives defined by FHFA.

Looking forward, you can expect more investments in the LIHTC market. In December 2023, FHFA announced an increase in Fannie Mae and Freddie Mac’s LIHTC equity investment cap starting in 2024 from $850 million annually to $1 billion annually. Increasing the amount each may invest in the LIHTC market, especially in areas that have difficulty attracting investors, will help expand the supply of affordable housing across the country to alleviate the affordable housing shortage.