FHFA announced a doubling of the annual cap for Fannie Mae and Freddie Mac in LIHTC developments — from $1 billion each to $2 billion each— totaling $4 billion per year.
- Half of the expanded investment will be directed toward LIHTC markets that are traditionally difficult to serve, with at least 20 percent of that portion earmarked for rural communities under the Duty to Serve initiative.
- This increase doubles the $1 billion cap set in 2024, continuing a steady expansion from $850 million in 2021 and $500 million when the GSEs re-entered the Housing Credit market in 2017.
This major expansion builds on the historic increase in funding for LIHTC included in the One Big Beautiful Bill Act (OB3).
- The focus is shifting to a critical next step: attracting additional investment. With more credits in circulation, how can we broaden the capital base and bring new participants into the market?
Some are asking whether the upcoming sunset of clean energy tax credits will shift investor interest toward housing. Others believe it may take congressional action to revisit the 1986 tax code, which imposed passive activity rules that have long limited individual participation in the LIHTC space.Michael Novogradac explores these questions in his recent piece, “Time for Congress to Expand Pool of Tax Credit Investors,” highlighting potential strategies to move the conversation forward.
