The Spring Street Brief

The Federal Reserve unanimously raised the federal funds rate to a target range of 3.75%–4% at its September policy meeting, citing inflation running at 3.4% year-over-year and elevated geopolitical and trade uncertainty. For LIHTC developers, syndicators, and lenders, the move translates directly into higher acquisition, development, and construction (AD&C) loan costs — compressing deal feasibility at a moment when affordable housing pipelines are already under pressure. Key Takeaways: The federal funds rate is now at a target range of 3.75%–4%, following a unanimous FOMC vote at the...

Show Notes

The Federal Reserve unanimously raised the federal funds rate to a target range of 3.75%–4% at its September policy meeting, citing inflation running at 3.4% year-over-year and elevated geopolitical and trade uncertainty. For LIHTC developers, syndicators, and lenders, the move translates directly into higher acquisition, development, and construction (AD&C) loan costs — compressing deal feasibility at a moment when affordable housing pipelines are already under pressure.

Key Takeaways:

  • The federal funds rate is now at a target range of 3.75%–4%, following a unanimous FOMC vote at the September meeting.
  • Inflation is running at 3.4% year-over-year, well above the Fed's 2% target — the primary driver of the hike.
  • AD&C loan costs rise directly with the federal funds rate, increasing construction financing expenses for affordable housing developers immediately.
  • The FOMC made no changes to balance-sheet reduction policy — no accelerated MBS sell-off — providing a measure of stability for 4% LIHTC bond deal pricing.
  • NAHB forecasts an additional rate hike in December 2026, with either flat conditions or a hike-then-cut pattern in 2027.
  • Real GDP growth is projected at 2.1% for 2026 and 2.4% for 2027; unemployment is expected to hold near 4.1% through 2027.
  • Energy price volatility remains an upside inflation risk that could push the Fed to act beyond current projections.

Developers and syndicators should stress-test construction loan assumptions against a higher-for-longer rate environment through at least mid-2027. Deals that were marginally feasible at prior rate levels need to be revisited now. The FOMC's own conditional outlook does not support betting on near-term relief — rate lock strategies and AD&C cost controls are the levers available today.

Subscribe to The Spring Street Brief for daily updates on affordable housing in America.

What is The Spring Street Brief?

The Spring Street Brief is your daily intelligence briefing on affordable housing in America.

In under 3 minutes, get the news that matters: LIHTC allocations, Section 8 voucher updates, HUD policy changes, private activity bonds, state housing finance agency deals, and emerging trends in affordable housing development.

Designed for LIHTC investors, affordable housing developers, syndicators, lenders, and policy makers who need to stay ahead of the curve.

AI-powered. Human-curated. Brought to you by Tom Carter at Spring Street Management Group.