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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and outside experts have called for the tax-exemption for municipal bonds, including for housing bonds, to be repealed or capped.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

  • December 2, 2017
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    In the early hours of the morning today, the Senate passed its tax reform legislation by a vote of 51-49, with all Democrats and Senator Bob Corker (R-TN) voting against the bill, and all other Republicans voting for it. As we expected, the final legislation retains both Private Activity Bonds and the Housing Credit.

  • November 16, 2017
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    The House of Representatives this afternoon passed its tax reform legislation, the Tax Cuts and Jobs Act, H.R. 1, which eliminates the tax exemption for private activity bonds, including Housing Bonds. The final vote was 227 to 205, with two Democrats absent. Thirteen Republicans voted against the bill along with all of the Democrats casting a vote.

    News

    Housing Bonds - Resources

    • November 6, 2017

      House Republican leaders on November 2 released their tax reform bill, the Tax Cuts and Jobs Act, H.R. 1, in advance of a Committee mark-up scheduled to begin November 6 at 12:00 p.m. The bill eliminates tax-exempt private activity bonds (PABs), including both multifamily and single-family Housing Bonds, for bonds issued after 2017. In addition to eliminating tax-exempt PABs, the bill repeals the related Mortgage Credit Certificate (MCC) program. The Municipal Bonds for America organization, of which NCSHA is a member, sent Congress a letter opposing the elimination of tax-exempt PABs.

    • November 6, 2017

      House Republican leaders on November 2 released their tax reform bill, the Tax Cuts and Jobs Act, H.R. 1, in advance of a Committee mark-up scheduled to begin November 6 at 12:00 p.m. The bill eliminates tax-exempt private activity bonds (PABs), including both multifamily and single-family Housing Bonds, for bonds issued after 2017. In addition to eliminating tax-exempt PABs, the bill repeals the related Mortgage Credit Certificate (MCC) program. The ACTION Campaign, which NCSHA co-chairs, also released a statement about the impact of the bill on the Housing Credit.