Syndicators Navigate Volatility in an Expanding LIHTC Market
The annual conversation with syndicators during AHIC's Fall Summit revealed an industry simultaneously celebrating historic wins and bracing for unprecedented challenges. The LIHTC program expansion promises to generate billions in new equity—but will the market be ready to absorb it?
The panel—moderated by Leigh Ann Merchant of Ally Bank and featuring Shereef Anbar (Hudson Housing Capital), Mike Griffin (Grow America), Marge Novak (Berkadia), and John Wiechmann (Midwest Housing Equity Group)—offered candid insights into how syndicators are adapting their strategies amid government shutdowns, construction volatility, and a potentially flooded credit market.
Balancing Debt and Equity
One perennial pain point between banks and syndicators is the demand for debt alongside equity investments. Banks increasingly want leverage ratios—anywhere from 1:1 to 3:1—to maximize returns and meet Community Reinvestment Act requirements.
Griffin noted his firm's advantage: a mixed investor base where not everyone demands debt. This allows Grow America to balance those demanding debt with those content with equity-only positions. The solution for many syndicators? Construction loans sourced outside the multifund structure. Griffin's firm has hired a dedicated team member to coordinate between their mortgage banking division and investor relations, specifically to match construction loan opportunities with equity investors who need debt.
The increased caps on Fannie Mae and Freddie Mac investments in LIHTC should help alleviate pressure since the GSEs don't require construction loans.
Government Uncertainty Creates Execution Risk
The elephant in every room at the conference was the government shutdown—day eight when the panel convened. For syndicators trying to close year-end deals, the implications were sobering.
"HUD's notorious for turning a two-week shutdown into a four-week shutdown," Anbar observed. With USDA already notoriously slow and now potentially facing staff reductions, the outlook for fourth-quarter closings looked increasingly grim.
For deals up against hard timelines—those needing credit refreshes with agency approvals or racing toward bond closing deadlines—the uncertainty adds yet another layer of complexity. The consensus view: even after the shutdown ends, the backlog and demoralized staff will mean year-end closing volumes fall short of typical years.
Rural Housing: Small Deals, Big Impact
Wiechmann's focus on rural Nebraska offered a counterpoint to discussions dominated by large urban projects. His firm specializes in smaller deals—averaging just 35-38 units and $7.5-8 million in total costs—with extraordinarily low leverage. His portfolio's watch list sits at just 3.43% by equity—extraordinarily low.
But rural development isn't cheaper than urban, despite assumptions. "Good luck finding labor. Good luck finding labor that wants to drive six hours from the metro area," Wiechmann noted. Construction costs often match or exceed urban areas, while rents and incomes remain far lower.
Wiechmann also raised concerns about misaligned incentives: some state QAPs award points for larger developments, leading to proposals for 45 units in towns of 2,000 people.
Construction Challenges Persist
Tariffs on imported materials, constraints on domestic production, and contractor risk-shifting have fundamentally altered the development landscape. "There was a time when construction contractors who gave you a lump sum general contract... that was their risk," Anbar explained. "They have gradually through the pandemic shifted that risk more to ownership, more and more."
Hudson's response: spending time talking directly to contractors before closing, understanding their concerns, discussing alternatives with design teams, and exploring substitutions that might avoid tariff-related charges. "Getting into the weeds quite a bit more in the underwriting on the development risk side is something that we have done and we're redoubling our efforts now," Anbar said.
Welcome Good News
Not everything was doom and gloom. On insurance—a topic that dominated syndicator conversations for several years—Griffin delivered welcome news: "Insurance costs have stabilized. We're not getting as many waiver requests." Carriers are returning capacity to the commercial general liability and umbrella markets, bringing premiums down.
Portfolio performance metrics also improved significantly in 2025 compared to 2024. "Our overall metrics are improving a lot," Griffin reported. "Percentage below 1.0 debt coverage, cash flow per unit—all of those metrics in our portfolio, we are seeing really nice improvement."
The amount of scrutiny deals receive before letters of intent has also increased dramatically. "The amount of time we're spending on underwriting deals pre-LOI has gone up tremendously, measured in months," Anbar revealed. This enhanced diligence reflects investor demands for certainty and ease of execution.
Resilience Amid Uncertainty
When asked for their biggest concerns and sources of optimism, panelists acknowledged government uncertainty and the coming flood of tax credits potentially overwhelming demand. But they also emphasized the industry's resilience.
Wiechmann captured the prevailing sentiment: "This is a resilient business. Cleared 08-09. Cleared '18. Cleared '20. We've got so much entrepreneurship, so much resilience. The market will clear, we'll find our new equilibrium, and we'll be creating housing for even more people."
As syndicators head into 2026, they face perhaps the most complex market environment in the LIHTC program's history: historic resources meeting unprecedented uncertainty. Success will require creativity, partnership, and—as Wiechmann put it—remembering that "we do this at least a little bit to help the people that we house. As long as that stays our North Star, we're going to be great."