NH&RA member firm, CohnReznick recently released a report examining the relationship between low-income housing tax credit (LIHTC) pricing and banks that invest in certain geographies in order to meet certain conditions under the Community Reinvestment Act (CRA) of 1977. The report, entitled “The Community Reinvestment Act and Its Effect on Housing Tax Credit Pricing”, suggests that CRA has become the most powerful engine of capital formation for developing affordable housing in the United States and that the largest single determinant of credit pricing is based on the CRA investment test value of a property’s location. However, there is a significant mismatch between investment objectives and the manner in which housing credits are allocated. So much so that the banking sector’s demand for LIHTC investment is not proportionately aligned with the location of housing credit properties which has led to overlapping CRA assessment areas in highly populated markets. As a result, the investment test tends to drive capital to areas that may have a disproportionately small number of investment opportunities. The study concludes that the premium that investors accept when investing in housing tax credit projects in cities is driven far more by their CRA value than by any notion that they are making a higher-quality real estate investment.