The demand for affordable rental housing is stronger than ever as the rising cost of living makes it increasingly difficult for people of modest means to make rent, let alone consider homeownership. Thanks to the low-income housing tax credit (LIHTC), which was established in 1986, there’s considerable incentive for investment in affordable housing. Since its inception, the LIHTC program has been successful in supporting the development of millions of affordable housing units across the U.S.

Despite the massive demand, LIHTC developments are facing some headwinds. High interest rates and construction costs are making deals even more complex. But even in these current financial conditions, it’s a thriving market. “LIHTC investing has been growing since 1986, and it remains stronger than ever,” notes Stacie Nekus, equity and syndications team lead for Cleveland-based KeyBank. “Last year, it was a $25 billion market.”

The LIHTC equity that syndicators have helped raise reflect that ongoing strength. KeyBank has been a direct investor in LIHTC since 1987 and recently entered the syndication market. The size of KeyBank’s first equity fund, which it established in 2021, was $67 million. This year, it expects to close seven funds to the tune of a cumulative $1 billion.

Nekus says that banks are the source of about 80% of the equity investments that go into low-income housing tax credit investments. Most of the remainder comes from corporations and insurance companies. In addition, “we’re seeing some soft financing provided by federal American Rescue Plan Act funds.” Financial institutions also are continuing to make investments in housing through Community Reinvestment Act funding, even though recent interest rate increases have significantly lowered the price per credit.

Fortunately, the affordable housing industry has remained resilient, which Nekus attributes to three key factors. “Number one is consistently strong investor commitment to the market. Another key reason is the operation of the developments themselves. Historically, these buildings have had a .03% foreclosure rate, and we’re still not seeing any issues with that.”

The third reason Nekus notes is true bipartisan support for the tax credit. “Affordable housing is not really a red or blue issue; it’s an issue families face in every community across the country.” She’s hopeful about a bipartisan bill, the Affordable Housing Credit Improvement Act (AHCIA), which would introduce comprehensive legislation to expand and strengthen the LIHTC program. “I think it would result in a lot more affordable housing being built.”

Meanwhile, syndicators like KeyBank help keep the LIHTC market going strong by supporting and collaborating with both investors and developers. “We can create relationships with other investors where we can provide both equity and debt in LIHTC deals,” Nekus says. “If we need to, we can stay in the deal for a while to help make decisions with developers.”

A recent project benefiting from equity investment is River Oaks Family Apartments, a 48-unit development for families being built in Plumas Lake, CA, by affordable housing developer Pacific Companies. The financing package includes $18.2 million in LIHTC equity, a $23.8 million construction loan, and a $2.4 million permanent loan. The River Oaks credits are being syndicated in a proprietary multi-property fund.

Equity fund investment is also playing a role in rehabbing Keeler Park Apartments, a 526-unit project in Rochester, N.Y., primarily serving Section 8 families. Affordable housing development companies Community Preservation Partners and Conifer Realty are upgrading the 50-year-old community. KeyBank’s Community Development Lending and Investment provided a $61 million acquisition loan and a $37.2 million equity loan to bridge part of the $52.5 million in LIHTC equity provided by Key Community Development Corp. In addition, KeyBank Commercial Mortgage Group arranged a $67.4 million permanent loan through the Fannie Mae MTEB. KeyBanc Capital Markets provided underwriting and placement of the bonds, and the bank’s tax credit syndication group syndicated the investment to a Fortune 500 company.

“We’re still seeing everybody—states, communities, investors, developers—come together to make sure that these deals are operating well and getting done,” Nekus says. And equity funding is helping make those deals happen. “We close a lot of different equity investments with the focus on LIHTC projects. Our goal is to do more with our clients and our partners to create and preserve affordable housing.”

To learn more about how equity funds can help developers build affordable housing projects, visit KeyBank at