What does "syndication" refer to in the context of LIHTC?

In the context of Low-Income Housing Tax Credits (LIHTC), "syndication" refers to the pooling of investment from multiple investors. This process is crucial because it allows developers to access funding for affordable housing projects. By bringing together funds from various investors, typically through a limited partnership or an investment fund, developers can raise the substantial capital required to finance the construction or rehabilitation of affordable housing units.

The pooled resources enable the project to benefit from the tax credits, which can be used by the investors to offset their federal income tax liabilities. This collective investment strategy is foundational to the LIHTC program, as it not only facilitates access to necessary funds but also helps in spreading financial risk among a group of investors, making the investment more attractive and feasible for developers focused on affordable housing.

In contrast, other options describe different concepts that do not apply to syndication in the LIHTC framework. For instance, selling properties to the highest bidder does not capture the collaborative nature of syndication, and financing through a single investor lacks the essential structure of pooling resources. Similarly, a strategy to avoid compliance regulations is unrelated to the concept of syndication, which is firmly rooted in complying with legal and regulatory requirements tied to the tax credits.