Sources of Tax Credit Equity Continue to Dry Up

Two major government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, announced recently that they are not making new tax credit investments. Together, these GSEs accounted for approximately 40 percent of tax credit investment annually for the past decade or so.

A lower price for tax credits has been the main effect of reduced GSE participation. The price for tax a credit in 2007 averaged approximately 93 cents, and that number is likely to drop below 84 cents in 2008, according to Affordable Housing Finance magazine.