In a year when low-income housing tax credit (LIHTC) equity is way down, the industry is also seeing a shift toward proprietary funds, said several LIHTC syndicators.

A move away from larger, multi-investor funds means that developers have to be ready to act more quickly to respond to investors and be considered and funded by the smaller, single-investor funds. That’s just one of the changes happening in the LIHTC market this year.

Syndicators and investors discussed the state of the market during a “Tax Credit Equity Outlook” panel at AHF Live. Moderated by Todd Sears, vice president of finance at developer Herman & Kittle Properties, Inc., the session was one of the most highly attended discussions during the conference, with developers packing the room to gain insight into market.

Pat Nash, managing director of JPMorgan Capital Corp., a key investor this year, said about 75 percent of his recent transactions have been on a private-label basis. He said his group is drawn to major markets and developers with strong track records.

Others agreed that there is a bias toward projects in major markets.

The deals that are not happening are those are that are highly structured and complicated, said Sebastian Corradino, managing director of RBC Capital Markets.

New construction deals using 4 percent tax credits have also been difficult to do this year, said Mark McDaniel, president and CEO of the Great Lakes Capital Fund.

Noting that developers want to look for the next deal, Andrew Weil, executive managing director at Centerline Capital Group, stressed that this is an important time for the industry to pay attention to the existing assets.

Despite the grim realities for the industry, the good news is that deals are getting done, added Cynthia Lacasse, president of John Hancock Realty Advisors, a LIHTC investor. She said it is important to look at the situation in a larger context. “Everybody is concerned about risk,” she said. “I think what this asset class has to do and what it did so well over the years is go to the capital markets and demonstrate where the risk is and where the risk isn’t and that this is a good, solid, safe investment. Over time, I do believe that we will get back to an equilibrium, but it’s tough right now, and it’s tough every place else.”

Joe Hagan, president of the National Equity Fund, Inc., said he believes the industry will start to see new investors in 2009, but they won’t fill the gap left by those that have left the LIHTC market. In the long-term, however, the market will settle down, he said.