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

  • November 20, 2015

    Today, HUD published on its website the 2016 Difficult Development Areas (DDAs) and Qualified Census Tracts (QCTs), which are eligible for the 30 percent basis boost under the Housing Credit program. As HUD has long planned, the methodology for determining 2016 metropolitan DDAs relies on new Small Area Fair Market Rents, and thus result in 311 zip code level small area metropolitan DDAs across 45 states, the District of Columbia, and Puerto Rico. This compares to 35 full metropolitan statistical areas in 11 states plus Puerto Rico that HUD designated as DDAs in 2015.

  • November 5, 2015
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    On November 4, the Republican Steering Committee voted to elect Representative Kevin Brady (R-TX) as chairman of the House Ways and Means Committee over Representative Pat Tiberi (R-OH), after newly elected House Speaker Paul Ryan (R-WI) threw his support behind Brady. The Steering Committee votes by secret ballot, so the actual vote tally is unknown.


    Housing Bonds - Resources

    • September 28, 2015

      Learn about the evolving multifamily lending market and the products and strategies HFAs and their partners are using. Get the latest on the HUD Federal Financing Bank (FFB) HFA Multifamily Risk-Sharing Program. Explore new GSE products and consider innovative tax-exempt bond executions, including sustainable neighborhood bonds.

    • May 12, 2015

      As the House Committee on Appropriations considers the Fiscal Year (FY) 2016 Transportation, Housing and Urban Development (THUD) Appropriations bill, we urge you to reconsider its devastating cuts to the HOME Investment Partnerships Program (HOME) and the attempt to offset these cuts by transferring all funding from the Housing Trust Fund (HTF), effectively eliminating HTF—a yet-to-be fully realized but critical tool to address the growing affordable housing crisis in this country. Not only should Congress not further reduce HOME resources, but it should restore at least some of the funding cut from the program in recent years.