One well-known Internet search engine has a new product—affordable housing.

Consider the Melbourne Apartments in Des Moines, Iowa, where only a family making less than $47,500 can rent a three-bedroom apartment.

Google helped finance the low-income housing project.

The Internet giant is among a number of new investors in low-income housing tax credits (LIHTCs)—a group that includes Verizon as well as insurance giants Liberty Mutual and Allstate—that have breathed new life into the sector.

“Google and other Internet giants have weathered the recession well and need a way to reduce their corporate taxes,” says Tammy Harpster, chief investment officer at San Diego, California–based TAAG Investment Management. “At 80 or 85 cents to purchase one dollar’s worth of tax credits, the economics are extremely beneficial. The tax credits will reduce a company’s tax obligation, which could result in greater shareholder distributions or more money to invest in growing the business.”

U.S. Bancorp Community Development Corporation (USBCDC), a division of U.S. Bank, arranged and manages the $86 million Low-Income Housing Tax Credit fund for Google, which is expected to provide a major source of funding for the construction and operation of 480 affordable rental housing units in seven communities throughout the West and Midwest.

“In recent years, there has been a void in affordable housing investment,” said Brent Callinicos, Google vice president and treasurer, in announcing the fund. “Our investment with USBCDC allows us to further our goal of providing relief to people who otherwise may not have access to quality housing.”

Relatively new as an investor in LIHTCs, Google is bringing fresh capital to the industry when many developers of low-income housing projects have faced significant funding gaps. Google’s and other companies’ commitment to affordable housing marks a continuing expansion of the affordable housing investor base beyond traditional investors such as banks and insurance companies.

“I look at it as an indicator of market recovery,” says Harpster. “More companies investing in LIHTCs will have a trickle-down effect by creating more affordable housing, thus creating more jobs, which will, in turn, fuel consumer spending. Affordable housing developers have had to reinvent themselves—turning to distressed real estate opportunities—to survive the downturn.”

Currently, the market is in flux. Stephen Whyte, managing director of Seattle, Washington–based Vitus Group who serves as the assistant chair of the Affordable/Workforce Housing Council of the Urban Land Institute, notes that high yields that characterized the affordable housing market in 2009–2010 have returned to more normal levels. “We’re seeing lower investor yields, to the point where we are now back to 2005–2006 levels—not quite the peak that the market once reached, but not far off from it either,” he says. “What is interesting to me about that is where Fannie and Freddie did 25 percent of the tax credit investment in the country, now they are out of the market completely and we are back at equilibrium, where there are virtually no tax credit projects going unfunded, and the level of funding is fairly robust. The pendulum has swung, and now there is concern that some of the recent entrants to the market who were attracted because of high yields could drop out.”

Still, new projects are sprouting up on both coasts as well as in middle America, providing an opportunity for real estate developers and investors. But don’t just jump in; the key to a successful project is to be sure the development will be viable over a long period of time. It’s important to obtain a good market review to understand the dynamics of the market.

In other words, those interested in entering the LIHTC arena should do their homework. “It is extremely competitive and tax credit allocations are heavily weighted toward track record, so consider partnering with experienced affordable housing developers if opportunities arise,” says Harpster. “Reach out to tax credit syndicators to understand the current financial structure of affordable housing projects. Be sure to take full advantage of this to learn as much as you can about affordable housing on a local and regional level.”