Legislative and regulatory shifts over the last several quarters have materially strengthened the economics of LIHTC development, with benefits accruing disproportionately to scaled, well‑capitalized sponsors. In addition to bipartisan momentum toward the largest expansion of LIHTC authority in roughly 25 years, Congress and the administration have protected and modestly increased core rental assistance, bolstering underwriting assumptions around contract rents, operating stability, and refinance or recapitalization options.

Furthermore, higher credit volume, improved clarity around income averaging and basis boosts, and state‑level efforts to layer soft debt have together raised achievable valuations for stabilized LIHTC assets and increased the equity value of general partner positions. These policy developments, combined with persistent investor demand for long‑dated affordable housing cash flows, have translated into more competitive pricing in GP interest sales. Yet funding gaps have widened with lower pricing by LPs for tax credits; demands for more developer skin in 9% deals; and, in 4% deals, an emerging need for new low-cost capital sources in order to take full advantage of reduced tax-exempt bond financing levels.

This policy and market backdrop continues to support strong demand for Affordable Housing Future Flow Contributive Asset Backed Securities (AHFCABS) backed by diversified general partner cash flows from LIHTC and Section 8 portfolios, particularly where sponsors can demonstrate conservative senior leverage and competent asset management. In recent AHFCABS executions, buyside and rating agency analysts have responded to policy uncertainty by sharpening their distinctions between resilient cash‑flow profiles and those more exposed to market rent volatility. Portfolios with long‑term project‑based HAP contracts, deep affordability, and/or low senior debt burdens are often treated as relative safe havens, and investor appetite for these structures has continued to outstrip supply—supporting relatively tight spreads for AHFCABS paper even through episodes of market volatility. Indeed, this paper is increasingly viewed as a way to gain investment‑grade exposure to essential‑service housing, with performance less correlated to discretionary sectors and more closely tied to enduring policy and demographic needs. Moreover, as credit quality in other fixed income bond issuance deteriorates with a sluggish economy, the demand for AHFCABS strengthens due to affordable housing’s inherent acyclical/countercyclical characteristics.

Against this favorable structural landscape, the near‑term path of the 10‑year U.S. Treasury is admittedly clouded by geopolitical risk, global growth concerns, and periodic flare‑ups in the Persian Gulf that can transmit quickly through energy prices and inflation expectations. That said, Westwood’s prior forecasts have anticipated a post‑inflation peak environment in which the 10‑year gravitates toward a 3.50–3.75 range as core inflation normalizes and central banks gradually complete their tightening‑to‑easing transition. In such a scenario, and assuming geopolitical shocks remain episodic rather than structural, A2‑rated AHFCABS paper priced at roughly 2.75 over the 10‑year would translate into mid‑6 percent coupons, a highly attractive cost of capital for sponsors effectively borrowing against their own equity via investment‑grade notes.

Westwood Capital originated AHFCABS structure in 2019 and has since led over $3.5 billion of issuance, with a market share exceeding 70% in this specialized segment. In the current environment—where affordable housing remains a policy imperative, investor demand for high‑quality LIHTC and Section 8 exposure remains robust, and the 10‑year appears biased toward a lower equilibrium over the next several quarters—now is a particularly opportune time to explore an AHFCABS program backed by your GP interests. Westwood would welcome the opportunity to discuss how such a structure can help you raise flexible, low‑cost capital for acquisitions, new development equity, LP buyouts, or broader corporate objectives, while positioning your platform to thrive amid evolving policy and macroeconomic conditions.

For further information on AHFCABS, please see this product description and the white paper “Gaining Leverage over the U.S. Housing Shortage,” authored by our Executive Chairman, Daniel Alpert, which together provide a more detailed description of the structure, policy context, and use cases for this form of CRE‑CLO financing.