Fannie Mae has closed on a $100 million low-income housing tax credit (LIHTC) fund, marking its first housing credit investment in about a decade.
The fund, known as Raymond James Affordable Housing Fund 11 LLC, will be managed by Raymond James Tax Credit Funds.
Fannie Mae is the sole investor in the proprietary fund, which will focus on Hurricane Harvey–impacted markets, as well as rural markets and Native American housing, by backing multifamily projects in these underserved areas with funding for rehabilitation and construction. The fund also will work to incorporate resiliency features into properties that are situated in markets subject to flood and storm activity.
The fund is expected to make its first investment in the first quarter of 2018. Approximately a dozen projects may be included in the fund.
“With the Raymond James Affordable Housing Fund 11, we can reach out to underserved markets and have a meaningful impact,” says Dana Brown, vice president, LIHTC investments, at Fannie Mae. “There is a need for capital to help shore up the supply of housing damaged by Hurricane Harvey and other underserved markets. This fund vehicle is an ideal tool to help make this happen and to support affordable multifamily housing overall.”
The move comes after the Federal Housing Finance Agency (FHFA) gave approval to Fannie Mae and Freddie Mac to return to the LIHTC market as equity investors last November.
Each government-sponsored enterprise (GSE) will have an annual investment limit of $500 million, less than a 5% market share for each. Within this funding cap, any investments above $300 million in a given year are required to be in areas that have been identified by FHFA as markets that have difficulty attracting investors. These investments are designed to preserve affordable housing, support mixed-income housing, provide supportive housing, or meet other affordable housing objectives.
Freddie Mac is also planning to make its return to the market this spring.
Fannie Mae and Freddie Mac were two of the nation’s largest LIHTC investors, representing an estimated 35% to 40% of the market, before being placed into conservatorship by FHFA in 2008. The enterprises’ financial condition deteriorated during the housing market crash, requiring government intervention.
“We are working on building out the platform while at the same time we’re engaging with potential syndicator partners with the intent of making an impact as quickly as we possibly can this year and beyond. This is the start of the build out of the business unit,” Brown says.
The return of the GSEs to the LIHTC market looks to be coming at a good time. Some other housing credit investors will likely be evaluating their participation following several changes made by the recent tax reform legislation.
Fannie Mae officials do not anticipate the legislation to impact their LIHTC activities this year. “At the same time, we’re looking at impacts of the tax legislation on the market and how we can help to maintain stability and liquidity in the market, which was one of our main goals,” says Brown.