CohnReznick’s annual survey of federal housing tax credit market participants has revealed that approximately $28.9 billion in investor equity was closed into housing tax credit funds and direct investments in 2024. This represents a 7.6% increase from the 2023 level. Somewhat complicating this calculation is the impact of direct investors syndicating deals from their direct portfolios. While similar to a secondary transaction, we consider these syndications to be new volume for the year. Notably, the volume cited reflects closed investor equity rather than lower tier property closing volume, consistent with prior surveys.

Throughout 2024, median lower tier pricing remained relatively stable, suggesting that pricing did not play a significant role in the increase in equity volume. Conversely, the expiration of the annual 12.5% increase in 9% credit supply in 2021 would lead some to think that volume might decrease. Instead, the continued proliferation of 4% credit properties in select market, as well as bank syndicators’ activity more than absorbed the decrease in 9% volume and likely contributed to the modestly higher volume observed.

Of the $28.9 billion total equity closed in 2024, 71% was syndicated and 29% was directly invested. Among the syndicated equity, 43% was multi-investor fund and 57% was proprietary fund investments. 

The Community Reinvestment Act (CRA) continues to be the primary driver of equity investment in affordable housing with bank investors accounting for approximately 80% of the total equity surveyed. The remaining 20% came from non-bank investors, including economic investors and the government-sponsored entities (GSEs). This result reinforces the critical role that CRA plays in sustaining the LIHTC equity investment market.

However, the future of CRA demand is uncertain. It is widely expected that the 2023 CRA final rule (which was to be implemented beginning January 2026 but currently stayed by a Texas district court injunction as of January 2025) will be scrapped and new rules yet to be formulated, the resulting impact to CRA motivated LIHTC demand remains unclear. 

Investors are also increasingly considering other tax credits as tools to manage their corporate tax liability. Despite increasing LIHTC IRRs, renewable credit investments continue to be attractive relative to LIHTC from a return and investment timeline perspective. Further, tax legislation in 2025 is expected to be extensive with many factors like the reduction of the 50% bond test, an increase of the credit supply and the potential to restart bonus depreciation that could impact the demand for LIHTCs. How the equity market weighs these considerations will no doubt impact pricing and demand – the extent to which remains unknown at this time.

While the 2024 LIHTC volume results are encouraging, the affordable housing market must navigate the challenges posed by regulatory changes and evolving investor behavior. Stakeholders should remain vigilant and adaptable to support continued investment in affordable housing amidst these uncertainties.