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Other key findings of the study include:

• The largest single variable in housing tax credit pricing is a function of the CRA investment test value of a given property’s location. The data CohnReznick collected finds that pricing spreads as wide as $0.35 per $1.00 of housing tax credit. This cannot be explained sufficiently by factors other than the CRA.

• There is a significant mismatch between the management in which CRA investment goals are set and the methodology under which housing credits are allocated. As a result, the banking sector’s demand for housing credit investment is not proportionately aligned with the location of housing credit properties. State housing credit agencies award credits based on their assessment of wherever there is a critical shortage of affordable housing and those shortfalls exist in communities of all stripes – not just our center cities. The allocation of credits to other parts of the state exacerbates the demand/supply imbalance in CRA Hot markets and drives pricing even higher. As a result, the investment test tends to drive capital to areas that already have sufficient capital to finance projects located in such areas.

• As investors have become more confident in the risk/reward profile of housing tax credit investments, prices have steadily increased for most of the past 20 years. The study found that the most sought-after CRA markets had the strongest resistance to steep decreases in tax credit prices, even in the midst of market uncertainty. When the equity market was at its historical peak in 2006, housing tax credits were trading more or less at ”dollar for dollar” in many locations.

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