As lawmakers continue to negotiate on a deal to avoid the “fiscal cliff,” one storied Washington law practice is holding its breath: Nixon Peabody’s tax credit finance and syndication group, which puts together deals for major banks that invest in affordable housing developments in D.C. and around the country.

Two important federal tax credits that give banks incentives to finance affordable housing and commercial properties in low-income neighborhoods are part of the tax “extenders” package that Congress is considering, and the outcome of the fiscal cliff deal could make it harder for affordable housing to get private sector funding.

One, the New Markets Tax Credit program, helps funnel capital into the development of commercial properties in low-income communities. The program expired at the end of 2011, and if it doesn’t get renewed as part of the overhaul of the tax code, it could mean a much harder road ahead in getting projects such as the Navy Yard development in Southeast D.C. off the ground, said Rick Goldstein, a partner in Nixon Peabody’s tax credit and syndication group.

Although the Navy Yard development — which includes a Harris Teeter and about 200 apartment units, a fifth of which are affordable housing — is already fully financed from previous rounds of New Markets Tax Credit funding, similar types of projects would be adversely affected if the credit is not extended, he said.

“Those are the kinds of developments that really serve as a catalyst for the redevelopment of neighborhoods,” said Goldstein, who represents investors, syndicators and public agencies in transactions using low-income housing tax credits. “There are a lot of developers simply saying, ‘I’ve got to hold off to see how this law plays out.’ ”

The second tax credit in play is the Low-Income Housing Tax Credit program, which helps subsidize 95 percent of all affordable housing units in the United States. While the program has been a permanent part of the tax code since 1993, one of its most important provisions is set to expire at the end of 2013 — part of the formula used to calculate the amount of credits that investors can collect.

“The result is the same property with the same costs and units serving the same number of people will get close to 20 percent less tax credit, and therefore less capital for projects that can’t get completed by the end of next year,” Goldstein said. “It’s making some properties not financially feasible.”

The law firm itself also has a stake in the game. Nixon Peabody has one of the premier practices in the nation that specializes in tax credits (Goldstein lobbied in the 1980s to make the Low-Income Housing Tax Credit a permanent part of the tax code, which paved the way for the firm to develop a transactional practice centered around tax credits). The group relies on tax incentives — including historic preservation, renewable energy and neighborhood revitalization tax credits — to put together deals to finance the construction of residential and commercial properties. If the credits don’t get extended, it’ll be much harder to make those deals work, said Goldstein, who also lobbies for the Affordable Housing Tax Credit Coalition.

“Right now, this hasn’t hit us quite yet in terms of slowing our business down,” he said. “Next year, if [the New Markets Tax Credit] doesn’t get extended, that’s a big part of our practice area, and it will become more difficult to do these deals.”

Jeff Lesk, managing partner of Nixon Peabody’s D.C. office and head of the tax credit finance and syndication group, said the issue is a reminder of how tax policy can influence investment decision.

“What do you do when the backbone of social programs is from financial institutions that are challenged?” Lesk said.