Housing Bonds

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 over 3.25 million lower-income families, historically 100,000 every year. Multifamily Housing Bonds have provided financing to produce 1.2 million apartments affordable to lower-income families.

Each state’s annual issuance of Housing Bonds is capped. The 2020 limit is $105 multiplied by the state population, with a state minimum of $321.8 million. MRB mortgages are restricted to first-time homebuyers who earn no more than the area median income (AMI). Larger families can earn up to 115 percent of AMI. In 2018, state HFAs provided MRB mortgages to families with an average income of $47,600, just three-quarters of the national median income. The price of a home purchased with an MRB mortgage is limited to 90 percent of the average area purchase price.

HFAs also use their MRB authority to issue Mortgage Credit Certificates (MCCs), which provide a nonrefundable federal income tax credit for part of the mortgage interest qualified home buyers pay each year. State HFAs have used MCCs to provide critical tax relief to nearly 323,000 families.

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 2016 alone, HFAs financed the development of nearly 50,000 affordable apartments through bonds.

Housing Bonds and Tax Reform

At the end of 2017, President Trump signed into law the Tax Cuts and Jobs Act (P.L. 115-97) the most comprehensive reform the of the federal tax code in nearly 30 years. The original version of the legislation, which passed the U.S. House of Representatives, eliminated Housing Bonds and MCCs. However, thanks to the strong advocacy of NCSHA, the HFAs, and their affordable housing partners, the final bill preserved these programs in full.

Maintaining and strengthening 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 exemption and to advance in Congress a series of reforms designed to streamline Housing Bonds and increase their effectiveness.


Photo Credit: Wisconsin Housing and Economic Development Authority