San Diego—Affordable housing developers are still looking for investors to buy $3 billion to $4 billion in low-income housing tax credits (LIHTCs) left over from 2007 and 2008, and one expert believes these tax credits will find buyers this year.

“These are ‘shovel-ready’ projects, to use the language of the stimulus bill, but they have no equity commitments,” said David Smith, CEO of Boston-based Recap Advisors. He addressed a session room sprinkled with bankers and investors Monday at the Mortgage Bankers Association CREF/Multifamily Housing Convention & Expo 2009 here.

The good news is that the market for LIHTCs should stop holding its breath once President Barack Obama signs the massive, long-awaited federal stimulus package into law, hopefully later this month. Various proposals for the bill contain changes to the LIHTC program that range from allowing investors to use LIHTCs to pay taxes from prior years to providing affordable housing projects with gap financing to make up for falling LIHTC prices.

Now in free fall, prices are as low as $0.65 for each dollar of LIHTCs, said Smith. That’s down from $0.85 before the capital crisis.

However, once the bill is signed into law, Smith said he expects investors to buy the overhang of LIHTCs in just six months.

Any bank that accepted money from the government’s Troubled Asset Recovery Program (TARP) should probably be investing in LIHTCs, he said. There are more than 150 of these banks, and many were not buyers of tax credits when Fannie Mae, Freddie Mac, and a handful of banking giants dominated the market in the recent past.

Smaller banks that accepted federal TARP money will come under pressure from Congress and regulators to act in the public interest, and that’s likely to include investments like LIHTCs. They are already being told to limit the pay of their executives. Also investment banks like Goldman Sachs and Morgan Stanley that transformed themselves into bank holding companies will have requirements for investing in underserved markets under the Community Reinvestment Act.

Also, consistently profitable companies like some computer firms and food manufacturers should join the market for tax credits. “At $0.65 or $0.70, this is a good investment for a CFO,” said Smith.