Dana Brown, GSE’s multifamily customer engagement vice president, said that Fannie Mae’s idea to raise its investment cap for the Low-Income Housing Tax Credit Market (LIHTC) to help disadvantaged renters is proof that the program works.
At the start of the month, Fannie Mae had announced that it would be increasing its commitment to the LIHTC by raising the cap to $850 million from $500 million.
This statement came right after the US Government announced plans to boost the supply of affordable rental units and raise Fannie Mae’s and Freddie Mac’s LIHTC equity cap.
Under this program, the government provides non-refundable tax credits to GSEs which are then handed to developers, who are supposed to allocate a proportion of their properties to low-income renters.
Brown said, that over the last 3 decades this program has really been the most successful one in the US in increasing the supply of affordable housing.
Since it was established in 1986 the LIHTC has subsidized more than three million housing units said the Tax Foundation.
However, many critics claim that LIHTC is very expensive and has very little effect on the overall supply of affordable housing.
Brown defended by saying that the program is effective and efficient. If there are any non-compliance, then Fannie would lose their tax credits.
Other aspects of LIHTC are providing counseling, job training, and after-school programs was highlighted by Brown.
Even when some investors had pulled out, thinking that LIHTC is high-risk Fannie Mae had stuck to its commitment to the program.
With due diligence and underwriting, there’s no big risk the program will perform as well as any other deal said, Brown.
According to the data from US Government, From January 2021 the percentage of renter households behind on rent dropped to 15.4% from 19.4%.
And according to Realtor.com, in August the median rental prices increased 11.5% reaching a double-digit growth for the first time in two years which again is an indication that the market is beginning to recover from the pandemic.
In a statement, the US Administration criticized mortgage speculators, because of the huge gap between the supply and demand of affordable homes for both renters and homeowners, which is making it difficult for families to buy their first home and is driving the rental costs also up.
They said in the second quarter of 2021, one out of every six homes purchased was acquired by investors, and more than 35% of purchases were made by investors who own more than 10 properties.
And it starts a vicious cycle of investors charging more for rent to recover their higher purchase costs.
Reference Source: MPA
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