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 2013 limit is $95 multiplied by the state population, with a state minimum of $291.87 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 2011, state HFAs provided MRB mortgages to families with an average income of $38,967, just 77 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.

The Housing and Economic Recovery Act (HERA) of 2008, championed by NCSHA and its allies, provided $11 billion in new Housing Bond Authority to be available through 2010 and made a number of additional changes, including exempting Housing Bond interest from the Alternative Minimum Tax (AMT).

The recent economic crisis significantly diminished investor interest in MRBs and therefore severely limited the amount of funds available to finance affordable home mortgages and multifamily loans. During this period, NCSHA works with the Administration and Congress to support HFA efforts to issue more Housing Bonds and address their variable rate debt liquidity needs. In October 2009, the Obama Administration announced its HFA Initiative, through which the Treasury agreed to purchase tax-exempt housing bonds from state and local HFAs to help them weather the weak credit markets created by the crisis. This program helped HFAs provide 135,000 affordable mortgages to responsible low-and-moderate income borrowers and supported the development and rehabilitation of 40,000 units of affordable housing. 

Housing Bonds and Tax Reform

Recently, as part of plans to comprehensively reform the federal tax code, the Administration and some in Congress have called for the tax-exemption for municipal bonds interest, 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. 


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

NCSHA Blog Posts

  • March 25, 2014

    On March 24, House Ways and Means Committee Chairman Dave Camp (R-MI) sent his Committee members a memorandum outlining his plan for pursuing tax reform and making some expiring tax provisions permanent this year.

  • March 14, 2014

    From March 3 through 5, NCSHA's Legislative Conference brought together HFA representatives from around the country and their partners to present a unified message to Congress about supporting NCSHA’s affordable housing priorities and taking advantage of the current affordable housing opportunity. During the conference, attendees heard from NCSHA leadership, key congressional staff, Administration officials, and industry leaders.


    Housing Bonds - Resources

    • April 16, 2015

      The Affordable Rental Housing ACTION (A Call To Invest in Our Neighborhoods) Campaign is a national, grassroots coalition focused on supporting investment in affordable rental housing. The campaign represents a broad cross-section of nearly 900 organizations and businesses dedicated to creating and preserving affordable homes for low-income families using the Low-Income Housing Tax Credit (Housing Credit) and multifamily tax-exempt private activity housing bonds (Housing Bonds). A full list of ACTION Campaign members is attached.

    • April 16, 2015

      The Municipal Bonds for America Coalition1 (MBFA) appreciates the opportunity to comment on proposals to improve the nation’s federal income tax system as it relates to community development and infrastructure. MBFA is a non-partisan stakeholder coalition of municipal bond issuers, State and local government officials, and regional broker dealers working together to explain the many benefits of municipal bonds, highlighting the federal tax-exemption which enables financing of vital infrastructure projects at the lowest cost to residents while maintaining the integrity and value of the municipal bond market and providing the highest quality investments for municipal bond investors.