---
title: The CRA Proposal Would Drop the LIHTC Investment Test for 416 Banks
description: The OCC and FDIC CRA proposal would drop the investment test for 416 banks between $1.649 billion and $10 billion, with rural tax credit deals most exposed.
image: https://dane-isaac.com/hubfs/dia-share.png
---

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# The CRA Proposal Would Drop the LIHTC Investment Test for 416 Banks

David Opalek October 14, 2026 3 minute read [Housing Policy](https://dane-isaac.com/dane-isaac-insights/tag/housing-policy)[Affordable Housing](https://dane-isaac.com/dane-isaac-insights/tag/affordable-housing)

Banks supply most of the equity in Low-Income Housing Tax Credit deals. The Affordable Housing Tax Credit Coalition (AHTCC) puts their share at roughly 75 to 80 percent and counts at least 71 percent as motivated by the Community Reinvestment Act. Under current CRA rules, a bank with more than $1.649 billion in assets is examined as a large bank, and the investment test is 25 percent of its rating. In July, the 21st Century ROAD to Housing Act raised the cap on bank public welfare investments from 15 percent to 20 percent, which gives banks more room to buy credits.

But the OCC and FDIC have proposed moving the line. Their joint CRA proposal, issued July 31, would raise the large-bank threshold to more than $10 billion. Banks between $1.649 billion and $10 billion would lose the investment test and be graded under an intermediate community development test that weighs loans, investments and services together, where strong lending can offset weak community development performance. The National Association of Affordable Housing Lenders (NAAHL) estimates 416 OCC- and FDIC-regulated banks would move. The agencies also asked about an alternative that would treat every bank under $10 billion as a small bank with no community development test, a group NAAHL puts at 1,512 banks.

AHTCC's survey found at least 108 banks under $10 billion invested about $1.6 billion in housing credit equity over five years, or about $2 billion extrapolated to the full market. Pricing is already soft: the September Housing Tax Credit Monitor, prepared by CohnReznick, put the median net equity price at $0.823, down from a $0.90 peak in September 2023.

Comments closed October 13. NAAHL filed and joined more than 475 housing, lending and community development organizations urging regulators to keep the affordable housing incentives. AHTCC also filed on October 13, and the National Community Reinvestment Coalition asked for at least 60 more days. The Federal Reserve did not join the proposal, so the state member banks it supervises stay under the existing framework unless it acts separately. None of this is in effect.

Congress gave banks more room to invest in July. The same month, the OCC and FDIC proposed removing the exam that gives 416 of them a reason to. Banks over $10 billion keep the test, so pricing in large metro markets should hold. The pressure lands where smaller banks are the buyers. AHTCC says banks under $10 billion put roughly a third of their housing credit equity into rural markets. In a CohnReznick industry sample, nonmetro counties drew 8.1 percent. In those markets, fewer bidders mean lower prices and tighter terms, and sponsors fill the gap with soft debt or deferred developer fee.

### What it means for pricing

Banks may pull back before any rule is final. A bank setting next year's CRA budget while its exam framework is in question has reason to slow commitments now. Some of today's soft pricing may already reflect that, though no published data separates it from rates and supply.

The ROAD to Housing Act's higher cap partly offsets this for the banks over $10 billion that keep their incentive. The state member banks the Federal Reserve supervises also remain CRA buyers under the current rules.

For sponsors with rural or smaller deals in the pipeline: underwrite equity below the current $0.823 median, lock investor letters of intent earlier, and court banks over $10 billion, which keep their CRA motivation.

### Sources

- [Weekly Real Estate News, October 13, 2026](https://wrenews.com/475-organizations-cra-proposal-affordable-housing-investment/)
- [Affordable Housing Tax Credit Coalition, October 1, 2026](https://www.taxcreditcoalition.org/weigh-in-with-regulators-on-cra/)
- [Tax Credit Advisor, September 14, 2026](https://www.taxcreditadvisor.com/articles/2026-cra-proposal-lihtc-equity-market/)
- [FDIC FIL-44-2026, July 31, 2026](https://www.fdic.gov/news/financial-institution-letters/2026/fdic-and-occ-seek-public-comment-joint-notice-proposed)
- [Affordable Housing Finance, August 6, 2026](https://www.housingfinance.com/policy-legislation/proposed-cra-changes-raise-alarms-affordable-housing-industry)
- [National Community Reinvestment Coalition, October 13, 2026](https://ncrc.org/ncrcs-comment-letter-opposing-the-occ-fdics-proposed-cra-rollbacks/)

**David Opalek** is the founder of Dane Isaac Associates, a real estate capital advisory firm in Columbus, Ohio. [Book a call](https://dane-isaac.com/contact) to discuss a transaction.

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