How Affordable Housing Developers Can Unlock Future Cash Flow Without Encumbering Assets
Brought to you by Westwood Capital · Oct 19, 2026 9:00am
The Low-Income Housing Tax Credit (LIHTC) is one of the nation’s most important tools for financing affordable housing. But even at current building rates, the program is falling far short of the need.
It would take well over a century to close the affordable housing shortfall at current production levels, according to an analysis by Daniel Alpert, founding managing partner of Westwood Capital LLC, a private investment bank and financial advisory firm. As the housing gap only widens, finding new sources of capital within the existing system is becoming increasingly important.
One financing tool, however, is offering a proven way for large-scale affordable housing developers and syndicators to unlock capital that’s long been tied up in future cash flows — the Affordable Housing Future Flow Contributive Asset-Backed Securities (AHFCABS).
The financial vehicle, originally conceived and structured by Westwood Capital, monetizes future cash flows from LIHTC investments and packages them into securities for institutional investors. Since 2019, AHFCABS has raised more than $4 billion across a variety of offerings.
In today’s market, the solution can give affordable housing developers additional capital to pursue more projects and compete for more tax credits, said Alpert, also a senior fellow in financial macroeconomics at Cornell Law School. And the firms that move first to embrace the capital-stack innovation will benefit the most.
“If you sit back and wait for your competitors to be the first to do this, in any given local region, you’re doing yourself a disservice,” he said. “The access to this low-cost capital is not only fomenting consolidation, but it’s fomenting competition.”
How AHFCABS works
AHFCABS allows an affordable housing developer to monetize future cash flows from their portfolio without putting their properties or direct ownership interests up as collateral.
“Future cash flow” in this instance refers to cash flows generated by a portfolio of completed LIHTC investments, including deferred developer fees, distributions of cash flow from operations, and distributions of net sale and refinancing proceeds.
Instead of waiting years to benefit from those payouts, developers can package the expected future cash flows into securities that provide capital upfront. Institutional investors buy the securities and receive principal and interest as the underlying cash flows are collected and contributed into the AHFCABS structure.
The financing is non-recourse, meaning the transaction does not encumber the underlying properties or general partner (GP) interests — and does not require any financial guarantees from the sponsors. That’s crucial in affordable housing deals where lenders and housing agencies can restrict second mortgages and other commitments.
The appeal to investors in the securities is the predictability of the underlying cash flows, which can generate long-term, stable payments. “It’s very, very difficult to default on these bonds,” Alpert said, citing typical 10- to 14-month interest reserves to cover potential shortfalls and a requirement that excess cash first replenish any draws on those reserves.
“What we are doing is we are taking what other people consider to be equity cash flows and turning them into investment-grade debt by using those cash flows to service a new mezzanine claim,” Alpert said. “This new slice of the capital stack is made possible by the unique stability of rental income, and low levels of senior mortgage payments, associated with LIHTC-eligible multifamily housing,” he added.
An important source of capital and a policy lever
Recent policy changes, including the One Big Beautiful Bill Act, have only amplified the financing tool’s potential. The legislation expanded LIHTC and lowered the 4% bond-financing threshold from 50% to 25%, allowing developers and allocating agencies to stretch tax-exempt bond capacity across more deals. AHFCABS can complement that change by providing developers with additional capital to help fill the capital stack.
“There are so many different channels through which this product benefits the LIHTC industry,” Alpert said. “Some of them are fortuitous. We didn’t design this for the notion that the 4% tax credit requirement for taxes and bonds would be cut in half. It was designed years before that was even a thought, but it fits hand in glove.”
The financing structure also has applications beyond new development. It can unlock capital for general developer liquidity — defensive capital that sponsors can hold in reserve to strengthen their balance sheets and weather market disruptions. It can also help finance acquisition-rehabilitation deals, where sponsors must front acquisition and renovation costs even if they plan to resyndicate the property and generate new tax credits.
Both uses can help preserve older LIHTC properties, which remain subject to affordability restrictions long after their original tax credits have been exhausted. Without new investment, Alpert said, those properties can deteriorate even though they must remain available to low-income residents. Liquidity on hand also lets developers fund repairs and cover shortfalls at existing properties without waiting on new financing.
For growth-minded developers, the availability of low-cost capital can make it possible to acquire land and build in expensive, job-rich infill markets where projects previously didn’t make financial sense. AHFCABS has also been widely used to finance entire portfolio acquisitions and has helped to consolidate the LIHTC industry.
The potential extends to public policy as well. By unlocking additional capital from existing LIHTC investments, AHFCABS can “optimize the value of the fiscal investment itself,” Alpert said. His analysis suggests the structure could enable nearly 28% more development and preservation of LIHTC-eligible housing units while increasing the broader economic benefits generated by the original LIHTC investment by more than 17%.
“It allows you to effectively engineer the generation of additional cash for these developers to then deploy in more projects, essentially accelerating their growth,” Alpert said.
Normalized, not exceptional, capital stack
One indication that the model is gaining traction is the number of repeat issuers, said Alpert, who detailed the benefits of the portfolio monetization strategy in a white paper for Cornell titled “Gaining Leverage Over the U.S. Housing Shortage: How the Private Capital Markets Are Enhancing U.S. Fiscal Policy to Expand Affordable Housing.”
One client has come back four times, using the structure to move from a mid-pack developer to a top-10 player nationally by adding new assets and tapping the market again.
That kind of repeat use points to the potential of his larger goal — making AHFCABS a go-to option for the affordable housing industry, Alpert said. “We’re hoping that this becomes a normalized, not an exceptional, part of the capital stack of LIHTC property portfolio owners."