Affordable Housing Hit by Credit Problems
- Mar 12, 2008
Boston–The credit crisis has taken its toll on affordable housing: About 40 percent of the equity in the typically $8 billion market disappeared in the past six months, according to Fred Copeman, national director of Ernst & Young’s tax-credit practice in Boston.Across the country, Copeman says that developers are “twisting on the vine” as a result, The Wall Street Journal reports. Because some of the largest U.S. financial companies–such as Fannie Mae, Freddie Mac and Bank of America–have reduced their participation in the federal government’s biggest affordable housing tax-credit program, many affordable housing projects are being canceled. The loss in below-market-rate housing is due in part to financial companies’ declining need for tax credits. The housing slump and credit crisis have hurt the financial industry; many of the financial giants just don’t have huge profits to protect from taxes–which would warrant amassing tax credits. However, the reduced need for tax credits is creating funding issues for developers, the Journal says.