LIHTC Market

Faltering LIHTC Market Underscores Importance of Quality Management

Source: nytimes.com

According to an article in the November 12 issue of The New York Times, Fannie Mae, Freddie Mac, and Citigroup have stopped buying Low Income Housing Tax Credits (LIHTC), one of the primary tools for meeting a growing need for affordable housing. Prior to this year, Fannie Mae and Freddie Mac alone bought about 35 percent of housing credits. As demand for credits has slackened, prices have fallen from around 90 cents on the dollar to less then 80 cents. Falling prices mean developers have less equity for affordable housing developments, resulting in fewer developments. Existing developments, however, still need quality real estate management.

Improper tenant income certification, neglected maintenance, and other poor management practices may cause the IRS to recapture housing credits. Everyone who benefits from the development, from the resident to the investor, shares the burden of a recapture. The demand for quality real estate management of affordable housing properties financed with LIHTCs may grow as developers, syndicators, and investors, already burdened by a sputtering economy, seek to shore up existing financial arrangements. Working with a qualified real estate management company may also help developers as they try to get LIHTC deals off the ground.

"LIHTC development may be slowing, but experienced managers of LIHTC properties need to understand and market the value they provide to existing properties. They also need to realize that they hold the competitive edge in landing the accounts for the developments that do get built," says Cindy Clare, CPM, President of KETTLER Management, a McLean, VA-based firm with LIHTC properties in its portfolio.

Source: www.nytimes.com

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