Industry Ponders Retail Platform for Low Income Housing Tax Credits

There is talk among developers that use low income housing tax credits of developing a commercial platform or marketplace in which to trade these credits. Whether it comes to fruition is unclear – there are significant challenges in establishing this kind of platform for such a complex form of finance. What is clear, though, is that something must be done to jumpstart the trade of these credits.

Ever since Fannie Mae and Freddie Mac were put into conservatorship in September, their purchases of LIHTCs have all put ceased. To be sure, developments dependent on LIHTCs have slowed considerably in the last year as the value of these tax credits have dropped significantly. But this issue is dwarfed by Fannie Mae and Freddie Mac’s de facto withdrawal from the market – the two agencies are among the largest buyers in the market. Indeed, earlier this month the National Association of Counties, the National Association of Local Housing Finance Agencies, the National Community Development Association, and the U.S. Conference of Mayors reportedly asked Treasury Secretary Henry Paulson and Federal Housing Finance Agency director James Lockhart, to direct the GSEs to start buying these credits again.

“There has been a flight to quality in the LIHTC market for over a year,” Gary Downs, a San Francisco-based attorney with Pillsbury Winthrop Shaw Pittman, tells GlobeSt.com. “And it has become even more acute over the last few months, as Freddie and Fannie decreased their purchases and at some points even ceased them all together.”