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State and local governments sell tax-exempt Housing Bonds, commonly known as Mortgage Revenue Bonds (MRBs) and Multifamily Housing Bonds, and use the proceeds to finance low-cost mortgages for lower income first-time homebuyers or the production of apartments at rents affordable to lower income families. MRBs have made first-time homeownership possible for almost 3 million lower income families, approximately 100,000 every year. Multifamily Housing Bonds have provided financing to produce nearly 1 million apartments affordable to lower income families.

Each state’s annual issuance of Housing Bonds is capped. The 2017 limit is $100 multiplied by the state population, with a state minimum of $305.3 million. MRB mortgages are restricted to first-time home buyers who earn no more than the area median income (AMI). Larger families can earn up to 115 percent of AMI. In 2015, state HFAs provided MRB mortgages to families with an average income of $48,571, just 87 percent of the national median income. The price of a home purchased with a MRB mortgage is limited to 90 percent of the average area purchase price.

Multifamily housing bond developments must set aside at least 40 percent of their apartments for families with incomes of 60 percent of AMI or less, or 20 percent for families with incomes of 50 percent of AMI or less. In 2015 alone, HFAs financed the development of over 38,000 affordable apartments through bonds.

Housing Bonds and Tax Reform

With Congress and the Administration currently considering legislation to comprehensively reform the federal tax code, several policymakers and outside experts have called for the tax-exemption for municipal bonds, including for housing bonds, to be repealed or capped. This would greatly diminish investor interest in housing bonds, making it much more difficult for HFAs to utilize these bonds to fulfill their affordable housing missions.

Advocating for support for the Housing Bond program is one of NCSHA’s Legislative Priorities. NCSHA is currently meeting with policymakers to ensure that housing bonds retain their tax-exempt status in any tax reform legislation that advances through Congress. NCSHA is also working to advance in Congress a series of reforms designed to streamline Housing Bonds and increase their effectiveness. These specific reforms are listed in the appendix of NCSHA’s 2017 Business, Legislative and Regulatory Priorities.
 

Useful Links: Treasury Department, Internal Revenue Service, IRS Information About Tax-Exempt Bonds

NCSHA Blog Posts

  • August 4, 2017
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    The U.S. Senate yesterday confirmed by voice vote several of President Trump’s nominees for key housing and tax policy positions, including: Neal Rackleff, to be HUD Assistant Secretary for Community Planning and Development; Anna Farias, to be HUD Assistant Secretary for Fair Housing and Equal Opportunity; and David Kautter, to serve as Assistant Secretary of Treasury for Tax Policy. The three nominees were passed as part of a broader package of 65 nominees spanning a variety of federal agencies.

  • July 28, 2017
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    The House Financial Services Committee on July 25 unanimously voted to report the Municipal Finance Support Act of 2017, H.R. 1624, to the full House of Representatives for consideration. The legislation, introduced by Representative Luke Messer (R-IN), would allow large banks to count some of their municipal bond investments, including tax-exempt housing bonds, as high-quality liquid assets (HQLAs) under federal bank liquidity standards. NCSHA and several other state and local organizations supported the bill.

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