Rising interest rates dinging commercial real estate and multifamily assets have plunged low-income housing tax credit (LIHTC) properties back into reality, especially those coming to the end of their 15-year compliance periods. “There were some huge profits made in the affordable housing space over the last two or three years,” says Cliff McDaniel, a managing director with Lument, which is representing Harmony Housing in the $1.4 billion sale of its affordable housing portfolio to the Michaels Organization. “We sold a lot of properties for $60,000 a unit or even $120,000 a unit, and the debt was $40,000 a unit. But the mania over that type of profitability is over, and values are going back to where they were before.” Up until about five years ago, the phrase “huge profits” and “affordable housing” would rarely if ever have occurred in the same sentence. Or even in the same story. Prior to that, affordable housing properties typically had very little value at the end of their initial 15-year compliance periods, and limited partners who provided equity to the project by buying tax credits routinely agreed to sell their interest to the general partner for a nominal fee. At that point, the …
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