We found this update on tax credit pricing in the Wall Street Journal on June 18, 2008. Is this a sign that the long decline and near collapse of the tax credit market coming to an end?
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The federal government’s largest program for producing affordable housing is showing signs of stability after months of being battered by the credit crunch.
Under the Low Income Housing Tax Credit program, syndicators raise money from investors to fund the construction of a project. In return, the investors — typically banks and other financial institutions — get tax credits to offset their profits at tax time. The problem: Demand for tax credits has waned among banks and financial giants Fannie Mae and Freddie Mac because they haven’t been registering profits. That has left developers with shortfalls in their construction budgets.
Now Trinity Financial Inc. and the Boston Housing Authority, the developers of Franklin Hill in Dorchester, Mass., have sold $45 million of federally sponsored tax credits through Enterprise Community Investment Inc., a syndicator.
Enterprise bought the credits at 90 cents for each dollar of credit. True, a year ago those credits would have sold for par. But Raoul Moore, vice president from Enterprise, says the deal is a sign the market is getting used to the new, lower pricing of the credits. “It feels like it’s a little more stable right now.”
Franklin Hill will include around 150 units aimed at folks who make at or below 60% of the area’s median income. State and city agencies filled the funding gap with grants.
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