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Freddie Mac does first post-crisis low-income housing tax credit deal

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Freddie Mac made its first equity investment into a low-income housing tax credit fund in nearly a decade, through a partnership with Enterprise Community Investment.

The fund will provide as much as $100 million in affordable housing investments, with more possible as additional transactions are closed.

In November, the Federal Housing Finance Agency permitted Freddie Mac and Fannie Mae to again invest in LITHCs, with the total investment capped at $500 million for each.

“This transaction with Enterprise is the first of many investments that will provide highly targeted affordable housing to some of the most underserved communities in the country,” David Leopold, Freddie Mac‘s vice president for targeted affordable sales and investments, said in a press release. “We look forward to continuing to work with Enterprise to provide better access to investment capital for developers, particularly those operating in areas that are often overlooked.”

The first investment from the fund is in Wintergreen West, a 40-unit project in Summit County, Colo., which is 75 miles west of Denver.

Eligible renters will earn between 30% and 60% of the area’s median income. It will be part of a larger mixed-income community being built.

More than 19 million households across the country are cost-burdened for housing, meaning they pay more than 30% of their income, with 11 million being severely cost-burdened, paying more than 50% of their income, Freddie Mac said.

“Our LIHTC investment initiative will focus on affordable housing preservation, rural housing, markets with uneven or unpredictable liquidity, and other underserved areas that have been identified in our Duty to Serve plan,” said Leopold. Doing so will have a significant positive impact on communities with some of the most serious affordable housing needs.”

Prior to the housing crisis, Freddie Mac made substantial investments in LITHC equity, reaching $4.2 billion in 2009 on a cumulative basis.

Enterprise has invested $12.8 billion in LIHTC equity to finance over 150,000 homes since 1982.

“This fund restarts a crucial partnership for producing well-designed, affordable homes,” Charlie Werhane, president and CEO, Enterprise Community Investment, said in the press release. “We look forward to working with Freddie Mac to provide homes that create opportunity for low- and moderate-income people in diverse, thriving communities.”

The fund will focus on developments that provide intensive supportive services to their residents, such as health care and job training. The financing can be used to create or preserve affordable housing.

Some transactions funded through this program, but not all, will have both equity and debt from Freddie Mac.

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