Fannie Focuses On 'CRA-Not' Locations As LIHTC Ceiling Lifts

While most banks focus on urban locations when investing in Low-Income Housing Tax Credits, Fannie Mae has taken a decidedly different approach, focusing instead on so-called “CRA-not locations.” 

A good portion of LIHTC demand is driven by the Community Reinvestment Act, legislation passed in the late 1970s that pushes federally insured institutions to invest in the communities where they’re chartered. But while most banks focus on “hot markets,” Fannie Mae instead looks to markets traditional investors may overlook due to potential risk. 

“We’re following the spirit and letter of what we’re supposed to do,” Dana Brown, vice president of multifamily at Fannie Mae, told Trepp in an interview. He added that Fannie Mae’s mission is to “be in every market, every day, where CRA investors aren’t chasing deals.”

Such projects include Grace Garden, a housing development for survivors of domestic violence and women and children experiencing homelessness in Fargo, North Dakota, and Mino-bimaadiziwin Apartments in Minneapolis, a 110-unit affordable housing project developed by the Red Lake Band of Chippewa Indians.

Recently Fannie Mae announced it had boosted its cap for investment in the Low-Income Housing Tax Credit to $850 million annually from the $500 million set in 2017 when it returned to that market. The agency’s research shows that LIHTCs support more than 40% of the multifamily market in Persistent Poverty Counties, regions with low population density and income levels. An average of 2,370 housing units have been supported annually by LIHTCs over the last decade, Trepp reported, and Fannie has invested in 576 LIHTC projects, including 177 in rural areas and 41 in high-needs rural regions, which include Native American communities.

Since Fannie Mae reentered the LIHTC market it has provided more than $1.5 billion of equity investments and partnered with 14 syndicators.