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.
NCSHA Blog Posts
- July 11, 2016
An article published in the spring 2016 issue of Evidence Matters, HUD’s quarterly research publication, highlights state HFAs’ track record of supporting sustainable and affordable homeownership lending for low- and moderate-income consumers. The article, entitled “Increasing Access to Sustainable Mortgages for Low-Income Programs,” examines HFA programs and similar initiatives administered by nonprofits that prove the viability of lending to creditworthy underserved borrowers.
- June 27, 2016
On June 22, Harvard University’s Joint Center for Housing Studies (JCHS) released The State of the Nation’s Housing 2016, its latest annual report on U.S. housing trends. While the report finds that the housing market continues to recover post-crisis, it highlights serious challenges, including all-time high renter cost-burdens, growing concentrations of poverty, falling homeownership rates, and tight mortgage credit. JCHS cites state efforts, including those by state Housing Finance Agencies (HFAs), to address these challenges but concludes that increased federal investment in affordable housing is also necessary.
- NYC HDC's website
- Bond Buyer
- Bond Buyer
- Maryland DHCD: Fitch Gives AA+ Rating to Community Development Administration’s Housing Revenue BondsJuly 9, 2013
Fitch Ratings, the global credit rating agency, assigned ‘AA+’ credit bond rating to DHCD’s Community Development Administration on their $52.5 million housing revenue bonds, 2013 series B and C, The Wall Street Journal reported Monday.
- May 16, 2013
The Illinois Housing Development Authority (IHDA) today announced its recent sale of $127.6 million in multifamily taxable bonds demonstrated strong private investor interest in Illinois housing bonds.
Housing Bonds - Resources
- May 16, 2016
At last measure in 2013, over one in four renters, or 11.2 million renter households, were
severely burdened by rents that took up over half their incomes. This total represented
a slight reduction from the record level of 11.3 million set in 2011, but remains
dramatically higher than the start of the last decade, having risen by more than 3 million since
2000. With substantial growth in renter households expected over the next decade and little sign
of a turnaround in the income and rent trends that produced these record levels of cost burdens,
there is little prospect for substantial improvement in these conditions over the coming decade.
- May 16, 2016
One telling indicator of the state of the nation’s housing is the drop in the homeownership rate to just 64.5 percent last year, erasing nearly all of the increase in the previous two decades. The number of homeowners fell for the eighth straight year, signaling persistently weak demand in this key market segment. And the trend does not appear to be abating, with the national homeownership rate down to 63.7 percent in the first quarter of 2015.