Investor Unease Starting to Lift as AHCIA Advances and Markets Adapt

The unease that gripped the Low Income Housing Tax Credit (LIHTC) investor market earlier this year—following a new administration and some uncertainty in Washington—has started to lift, according to industry syndicators. The market is further buoyed by the continued legislative advance of the Affordable Housing Credit Improvement Act (AHCIA).

Tax Credit Advisor spoke with some syndicators and developers about the current market atmosphere and found that the sense of unease that had captivated the market earlier this year may be starting to wane, albeit moderately. Still, remaining uncertainty has impacted the price of tax credits in some markets, lowering it especially for economic investors.

“It’s been an odd year,” says Tammy Thiessen, managing director of equity sales for RBC Community Investments. “I would say the end of 2024, leading into 2025, have been strange times coming off the election, with people feeling uncertainty about what impact the geopolitical environment might have on the market and on the tax credit. …Now, I think people are more [confident] that the tax credit is not in jeopardy.”

Thiessen adds that many investors who may have exited the market during the early part of the year are looking to return. “I think folks are starting to feel more comfortable that a lot of points of uncertainty are less troubling,” she says.

A key element of the increased investor confidence is the legislative advancement of the AHCIA. The AHCIA increases housing credit allocations by restoring, for 2026 to 2029, the 12.5 percent cap increase that expired in 2021. It lowers the threshold for private activity bonds that are required to trigger the four percent housing credits available to properties from 50 to 25 percent. The measure also provides a basis boost for rural, tribal, and extremely low-income housing.

The provisions of the AHCIA, which have broad bipartisan support, have been included in the One Big Beautiful Bill Act (H.R. 1), which was officially signed into law on July 4, 2025.

Still, the financing picture for affordable housing remains “in flux,” says Armond McCoy, project manager at Cruz Development Corporation. “We have to be really creative in search of other sources for gap funding fillers.”

McCoy says some of the gap funding his company has pursued comes from local sources, such as energy rebates through a pilot project in Prince George’s County, MD. “Energy rebates are offered as long as you meet the requirements,” says McCoy. “It isn’t much, but every dollar helps…It allows the property to carry more debt because the annual real estate tax bill is reduced for a period of time.”

The looming adoption of new and higher tariffs has also created uncertainty for developers and investors.

“There’s a lot of noise around what the tariffs will do on the supply side and whether they will increase construction costs, especially lumber and steel,” explains Sarah Laubinger, chief operating officer at Greystone Real Estate Capital. “We’re still yet to see that play out, but obviously the industry is taking a lot of cautionary steps in underwriting of new deals to make sure that the development budgets have enough cushion to absorb increases to those line items, should the tariffs impact them. Taking the options to use U.S. materials is also an alternative we’re seeing.”

 Tax Credit Pricing Softens
Tax credit pricing has softened in many markets throughout the country, according to some syndicators, with pricing for economic investors taking the biggest hit.

“Economic pricing is high 70s to low 80s,” says Laubinger, “while Community Reinvestment Act (CRA) capital is high 80s to low 90s.” Though that ten to 15 cent price difference may not sound like a lot to industry outsiders, “when you multiply it through a deal, it can actually have quite an impact,” she says. “Not only does the cash developer fee get squeezed, but necessary value engineering limits housing production and quality. So, developers are really trying to make sure they’re able to execute on these deals with enough margin to support their business plans while also preserving overall deal feasibility.”

Thiessen also sees a softening, continuing a trend that began towards the end of last year, particularly for deals outside of top CRA markets. “CRA type deals are probably mid-80s to low-90s,” she says. “There are outliers; some are getting higher pricing if you’re looking at a Boston or New York City, or where there are a lot of banks vying for credit. For economic deals, we’re seeing prices in the high 70s to low 80s at best.”

Despite some fluctuation, she stresses that deals are still getting done. “We at RBC Community Investment continue to close deals, certainly with our CRA-motivated investors, who are standing by their commitments.”

McCoy says tax credit pricing “varies wildly” depending on location.

“There are some purchasers of the tax credit who have gone quiet,” says McCoy. “I think they are waiting to see what happens. We are getting quotes for our Boston projects that are in the 90-cent range. Boston is still in high demand for the tax credit market. College Park, MD, for instance, is lower.”

Pricing also has been impacted by some investors turning to the renewable energy tax credits that were passed in the Inflation Reduction Act (IRA). Once those credits expire, it remains to be seen whether those investors will return to LIHTC.

“The energy credit provisions that were part of the IRA, if those don’t survive, does that drive some of the economic investors and some of those bank investors back to LIHTC?” Laubinger points out.  “Does that drive demand up? It remains to be seen.”

It is also unclear how passage of the AHCIA will impact credit pricing. “If the credits do get expanded, will the increased credit supply have an impact on investor demand?” asks Laubinger.  “Will that increase yields and lower investor pricing? We don’t know yet. So investors are cautiously committing to new business, knowing that sort of pricing phenomenon is out there on the horizon.”

Role of Syndicators Increasingly Important
The uncertainty in tax credit pricing and the market in general has syndicators joining deals earlier in the timeline, and at a highly granular level, they report.

“Syndicators are getting involved much sooner—sometimes a year, two years in advance—of a specific property actually closing on its financing,” explains Laubinger. “We’re working side by side with investors, so that the deals are getting, from conception through financial closing, a lot of input and collaboration from the syndicator. …It’s an intricate process, even above and beyond a typical seven- or eight-page letter of intent.”

Laubinger says the type of in-depth analysis syndicators are now providing occurs even before an application for tax credits has been made. “We’ll say, ‘I noticed in your operating budget that your insurance line item is atypically low and may be at risk of not ultimately clearing the market.’ Developers appreciate the early feedback as they put the pieces of their deal together,” she says. “It’s that kind of granularity that the industry has evolved to, well in advance of even a tax credit award.”

Still, despite the uncertainty in the market and pricing of tax credits, deals are being completed because syndicators and developers remain creative.

“It’s been a tough year for everyone involved, just trying to manage through the logistics and the what-ifs in trying to make sure we’re doing our job to bring affordable housing to communities where it is needed,” says Thiessen.  “But I’ve been doing this for over 20 years, and we’ve seen a lot of strange things happen over the years, whether it’s a great recession or government shutdowns or when Fannie and Freddie had to exit the market. All of these things have happened over time, including COVID, and we just roll up our sleeves and figure things out.”

McCoy says his firm “has several deals in the pipeline.”

“We are hoping by the time we are ready to go out for financing, things will calm down,” he says.

Laubinger also believes the current pressure within the industry only makes it stronger.

“The industry continues to get better and more sophisticated when the pressure on production goes up,” says Laubinger. “Investors want to put their money in affordable housing. It’s a relatively safe asset class, and the right thing to do. …They’re committed, and they want to see their capital put to use in this way.”