A year ago, the talk of the low-income housing tax credit (LIHTC) world was rising prices. Today, those prices remain healthy, but have stabilized and are predicted to hold their course going into the second half of the year.

“Investors’ yields have increased modestly, and tax credit prices have begun to level off or possibly decrease,” reported Stephen B. Smith, executive vice president of The Richman Group Affordable Housing Corp.

Smith said he anticipated prices to remain steady or decline during the balance of the year, primarily because of investor demand for increased yields.

Others agree that the stabilizing prices have been the big trend so far in 2006. Steve Kropf, senior vice president of Raymond James Tax Credit Funds, Inc., said that he does not expect prices to rise from current levels.

“There isn’t much more give in anyone’s pricing model for price hikes like we’ve seen over the past two years,” added Joe Hagan, president and CEO of the National Equity Fund.

Pricing, he said, has stabilized, although it is still relatively high. “In effect, rates of return have reached an unsustainable level that has prompted many investors to reconsider their level of LIHTC investment activity, given the compression between returns and cost of funds,” Hagan said.

He said developers should be prepared for potential price declines in the coming months “as the market begins to right itself.”

“Prices in the first quarter remained steady compared to year-end,” said Paul Cummings, senior vice president, syndication, at Enterprise Community Investment, Inc. “The low yields for tax credit investments certainly have a hard time competing with some other investment options, including New Markets Tax Credits.”

The competition for LIHTC deals, however, remains strong, he said.

Several syndicators reported that the average price paid per dollar of tax credit in the first quarter was 95 cents or more. Yields ranged from about 4.5% to 7%.

The industry has also recently seen a few LIHTC syndication firms being sold or reorganized.

“The consolidation was bound to happen given the pricing and fee environment of the last few years,” Hagan said. “It’s not a lot different than other businesses. As competition heats up, the more efficient and productive market participants do well and others don’t.”

NEF is fortunate that it reorganized in 2000 and has been positioned for the recent competitive condition, he said.

Asked about the effects of the recent sales and reorganizations at other firms, one syndicator reported that it appeared that some lower-quality deals are not getting done.

Others said there’s been no major effect so far. “There is plenty of capacity among the remaining syndicators to syndicate all available tax credit properties in the market,” said Smith.

Alliant Capital reported raising $103 million in equity and acquiring 17 developments in the first quarter.

“We do not anticipate a jump in price in 2006 similar to what we experienced in 2005, primarily because there seems to be little room for further price increases,” said Carl Wise, senior vice president. He noted that demand for tax credits remains high.

On the acquisition side, Wise said he was seeing “plenty of competition and some aggressive bidding.” On the equity side, there was some pull back and more selective buying from investors, he said.

Boston Capital raised about $150 million and acquired 11 projects in the first quarter, according to Jeff Goldstein, executive vice president and chief operating officer.

Goldstein said he expects prices and yields to stabilize.

Enterprise Community Investment, Inc., acquired 20 projects in the first quarter, according to Cummings.

“In 2006, we are focusing our efforts on existing and new initiatives, including green, supportive housing, mission-based deals, preservation and the Gulf region,” he said.

In 2005, the firm closed more than $693 million in LIHTC equity in 140 projects.

The National Equity Fund acquired 13 developments in the first three months of the year.

“We are doing more 4% deals than in the past, though the bulk of our pipeline remains 9% deals,” Hagan said. “Not surprisingly, we are seeing a lot more activity out of the Gulf region, which has been a steady market for us in recent years but by no means our strongest. We have some strong connections with local developers and expect to be doing a lot of deals in the GO [Gulf Opportunity] Zone this year.”

PNC MultiFamily Capital raised about $21 million and acquired 11 projects in the first quarter. Todd Crow, director of institutional sales and portfolio management, said developers should keep their eyes on “interest rates and behavior of large LIHTC investors as a leading indicator of future market conditions.”

Raymond James Tax Credit Funds, Inc., raised $100 million and acquired 22 projects in the first quarter.

The Richman Group Affordable Housing Corp. raised $107 million in the first quarter and acquired 27 developments. The firm was in the process of closing a multi-investor fund of $235 million in May.

1st quarter tax credit activity


Price (cents)

Upfront Pay-in


Raise (millions)


Alliant Capital






Boston Capital






Enterprise Community Investment, Inc.






National Equity Fund






PNC MultiFamily Capital






Raymond James Tax Credit Funds






The Richman Group Affordable Housing Corp.






“Price” is the average paid per dollar of tax credits for acquisitions. “Pay-in” is the percentage of funds paid upfront (on closing of operating partnership).“Raise” is the amount of capital raised or, for direct investors, the amount invested, in millions.

Source: Affordable Housing Finance survey, May 2006