Big deals are getting bigger advantages in affordable housing

A clear divide is emerging in the Low-Income Housing Tax Credit (LIHTC) market—and deal size is increasingly shaping where investor capital flows.

There is no shortage of transactions seeking capital, but investors are becoming more selective about where they put it to work. Larger deals are gaining traction, while smaller transactions are facing a more challenging path to investor attention.

That gap may have less to do with credit quality than with efficiency.

Investors have more opportunities to evaluate and capital to deploy, but the teams and infrastructure required to underwrite and manage those investments have not expanded at the same pace. As a result, scale carries a growing advantage. A larger transaction can put significantly more capital to work without requiring a proportional increase in underwriting, closing, and asset management resources.

The impact could extend well beyond LIHTC equity. As investors place greater value on efficiency, scale may increasingly shape which affordable housing transactions attract capital, which sponsors are best positioned to compete, and how owners think about smaller assets, portfolios, recapitalizations, and sales.

More volume is changing the capital equation

Transaction volume in the LIHTC market is one of the biggest changes from 2025.

Recent policy changes have helped expand the pipeline. The 12 percent increase in housing credit allocations has enabled allocating agencies to make larger 9 percent credit awards, providing additional equity that can help transactions offset lower LIHTC pricing. Lowering the bond financing threshold to 25 percent has also allowed developers to use less volume cap to generate the same amount of 4 percent housing credits.

Those changes have been positive for affordable housing production. But they have also helped create significantly more transaction volume at a time when investor resources have not increased at the same rate.

That imbalance is creating a practical capacity constraint.

For an investor, underwriting a large transaction does not necessarily require proportionally more resources than underwriting a much smaller one. The amount of work involved in underwriting a $70 million transaction may be similar to the work required for a $10 million transaction.

Given that choice, investors looking to deploy significant amounts of capital efficiently have an incentive to go bigger.

Larger investments are becoming the price of entry

Investor preferences have shifted significantly.

A few years ago, transactions with more than approximately $25 million to $30 million in equity could be difficult to place. Today, that amount can be the “price of entry” for certain investors.

Some investors are looking at deals with $50 million to $100 million in equity and may even consider transactions exceeding $100 million.

That preference naturally influences the types of developments attracting capital. Larger equity investments often correspond with larger communities, potentially ranging from roughly 150 to 400 units. Those properties are also more likely to be supported in larger urban and suburban markets than in smaller or rural markets.

The scale premium can ripple through the market. A preference that starts with investor operating efficiency can ultimately influence transaction size, geography, and development strategy.

Bigger deals can favor bigger balance sheets

Scale can also affect which developers are best positioned to pursue these transactions.

As deal size increases, so do the financial requirements placed on sponsors and guarantors. Investors pay close attention to sponsor quality, net worth, liquidity, and the financial capacity to support a development through execution.

That can give larger, more institutional sponsors an advantage.

Some large nonprofit developers can meet those requirements, too. But smaller locally focused developers, family-held development companies, and smaller housing authorities may have more difficulty satisfying the financial qualifications associated with a very large project.

Scale can influence which organizations have the balance sheets to compete for capital in the first place.

For developers, understanding those expectations early can help inform decisions about project size, capital partners, joint ventures, and other strategies for moving a transaction forward.

Timing is becoming another competitive advantage

Size is only one part of the capacity equation. Timing matters, too.

Investors began filling their 2026 pipelines unusually early. Many committed significant portions of their available capital well before the second half of the year, and Walker & Dunlop began having meaningful conversations about 2027 investments during the second quarter of 2026.

We recommend that developers start conversations with equity partners well before they are ready to issue a formal request for proposal. It is a good idea to share your 2027 and even 2028 pipelines with syndicators and investors now.

That visibility allows capital partners to plan allocations and reserve capacity. It also gives developers more time to understand how investors are viewing a transaction and identify potential challenges before deadlines become pressing.

Expectations around the proposal process may need to change, too. In the current market, a 30-day turnaround for a thoughtful, executable proposal is increasingly unrealistic. Developers may need to plan closer to 90 days.

The lesson is particularly important in a market constrained by human capital. An investor can have capital available and still lack the organizational capacity to take on another transaction.

Getting onto an investor’s calendar early can be nearly as important as the deal's economics.

Smaller deals still have a path forward

A growing preference for large transactions does not mean smaller affordable housing deals cannot attract capital. It does mean developers and owners may need to be more deliberate about how they compete for it.

Starting capital conversations earlier can provide more time to identify the right investors. Owners can evaluate whether portfolio, recapitalization, or joint venture strategies create a more compelling opportunity. Developers can also consider how project scale, sponsor financial capacity, and market selection will affect investor appetite before a transaction formally comes to market.

Meanwhile, a segment attracting less institutional attention can create its own opportunities. Smaller transactions that receive less investor interest may become attractive to capital providers with the resources, mandate, and operating model to pursue them.

The divide should not be viewed simply as large deals winning and small deals losing. It signals that the economics of capital deployment are changing.

Efficiency is becoming part of the investment thesis

Affordable housing has navigated several challenging years marked by rising costs, interest rate volatility, and operating pressures. There are reasons for optimism in how developers have responded, with many emerging with stronger financial positions and improving balance sheets.

Now the market is adjusting to a different challenge: more transactions competing for finite investor capacity.

For developers, that makes early engagement and capital planning increasingly important. For owners, it can make portfolio construction and asset positioning more consequential. And for investors, it reinforces the value of finding ways to deploy capital efficiently without compromising underwriting discipline.

The result is a market in which the size of a transaction can influence far more than the amount of capital involved. As affordable housing enters this next phase, scale itself is becoming part of the investment equation.

Position your next affordable housing deal for capital

Whether you’re planning a new development, evaluating a recapitalization, or considering a portfolio strategy, Walker & Dunlop can help you understand how today’s capital providers are evaluating opportunities and identify a path forward. Reach out to our affordable housing experts today.