Fannie Mae and Freddie Mac continued to be significant low-income housing tax credit (LIHTC) investors in 2020.
The government-sponsored enterprises (GSEs) each made $500 million in LIHTC investments last year, hitting the limit set by the Federal Housing Finance Agency (FHFA).
Fannie Mae and Freddie Mac used to be among the largest LIHTC investors in the country, representing an estimated 35% to 40% of the market, before being placed in conservatorship in 2008 as their financial conditions deteriorated during the housing market crash.
After about a decade on the sidelines, the GSEs were allowed to return as LIHTC investors but with an annual investment limit of $500 million each.
Fannie Mae recently reported that it has provided $1.5 billion in LIHTC equity investments since returning to the market in 2018, helping to create or preserve 576 affordable properties in 46 states and the District of Columbia.
The investments have enabled the preservation and production of LIHTC properties with a focus on underserved populations (Native American and farmworker communities), underserved markets, supportive housing developments, and disaster-impacted areas.
“Our LIHTC investments provide a reliable source of capital and serve as a stabilizing influence on affordable housing throughout a wide range of economic cycles,” says Michele M. Evans, executive vice president and head of multifamily at Fannie Mae. “These investments are part of our larger effort to increase and improve the affordable housing supply and help underserved markets.”
Of the LIHTC properties benefiting from Fannie Mae’s equity investments, 177 are in rural communities in 38 states, and 41 serve high-needs rural regions and populations, including Native American communities.
“Housing is inextricably linked to the broader community, and our LIHTC investments ensure there is financing for properties that offer services, help homeless households, and bolster affordable housing in high-needs rural areas,” says Dana Brown, vice president, multifamily, Fannie Mae. “We want to acknowledge FHFA and our partners in the LIHTC market for their help in supporting our efforts to create more stable and vibrant communities. We look forward to continuing to support these overlooked communities.”
In 2020, Fannie Mae committed to invest with six syndicator members of the National Association of State and Local Equity Funds—CAHEC, Cinnaire, Evernorth, Midwest Housing Equity Group, Ohio Capital Corporation for Housing, and VCDC (Virginia Community Development Corp.).
One of its recent projects is Mino-bimaadiziwin Apartments in Minneapolis, which will provide 110 units of affordable housing. Developed by the Red Lake Band of Chippewa Indians, it will serve residents earning 30%, 50%, and 60% of the area median income with 24 units set aside as permanent housing for individuals who have been chronically homeless. Fannie Mae invested in this project through the Raymond James Affordable Housing Fund 12.
Overall, Fannie Mae had a record 2020, providing $76 billion in financing for the multifamily market—the highest volume in the history of its 32-year Delegated Underwriting and Servicing program. Its affordable housing volume totaled $9.3 billion in 2020.
Freddie Mac also provided its maximum $500 million in LIHTC investments in 2020, supporting underserved communities across the United States.
A map of the company’s LIHTC investments shows Freddie Mac investing in 38 properties with more than 3,500 units. The properties are in 19 states.
Freddie Mac invested $12 million in the 53-unit Tieton Farmworker Housing Apartments that is under development by Catholic Charities Housing Services in Tieton, Washington.
The company also invested in McCormick Crossing, a 48-unit development by Woda Cooper Cos. in Sisterville, West Virginia.
Freddie Mac officials reported that their overall multifamily line of business set a record with $82.5 billion in loan purchase and guarantee volume last year. The company had a record $12 billion in Targeted Affordable Housing loans.
“In a volatile year, Freddie Mac was a stabilizing force in the multifamily market,” says Debby Jenkins, executive vice president and head of Freddie Mac Multifamily. “The fact that we hit a record in the midst of a pandemic shows our commitment to be a consistent source of debt financing for multifamily operators in both good times and bad. Our network of Optigo lenders did not skip a beat, and the Freddie Mac team kept up with a demanding pace to ensure we fulfilled our mission. At the same time, we exceeded our mission-driven benchmarks and the vast majority of the units we financed are affordable to low- and moderate-income households.”
The $82.5 billion in 2020 production combined with the $17.5 billion in Q4 2019 volume puts Freddie Mac right at the $100 billion cap mandated by the FHFA, according to Freddie Mac. The company surpassed its 37.5% mission-driven requirement with approximately 40% of volume meeting the definition.
