Affordable Housing Finance: How Rising Interest Rates and Inflation Impact LIHTC Deals
Spiking interest rates can impact low-income housing tax credit deals in a number of different ways. Most notably, higher rates can make borrowing debt more expensive and reduce loan proceeds, putting increasing stress on development budgets.
“As investors start to recalibrate IRR (internal rate of return) hurdles, we anticipate a sustained higher rate environment may begin to create a drag on equity pricing thus resulting in more strain on development budgets. The availability of state, local, and other financing sources to fill the development gaps will be increasingly more important.”– Todd Jones , Senior Vice President and Head of Tax Credit Equity Production
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