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 3.3 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 2021 limit is $110 multiplied by the state population, with a state minimum of $324.9 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 2019, state HFAs provided MRB mortgages to families with an average income of $46578, 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. MRB loans can also be used to help working families finance critical home repairs or energy efficiency upgrades.
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 homebuyers pay each year. State HFAs have used MCCs to provide critical tax relief to more than 346,000 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 2019 alone, HFAs financed the development of nearly 54,000 affordable apartments through bonds.
Strengthening Housing Bonds
Maintaining and strengthening the Housing Bond program is one of NCSHA’s Legislative Priorities. NCSHA is currently meeting with lawmakers to advance legislation, the Affordable Housing Bond Enhancement Act that would implement several simple but impactful changes to Housing Bonds and MCCs that will allow HFAs to serve more households.
Some of the changes in the bill include:
- Increasing the MRB home improvement loan limit
- Allowing MRBs to be used for refinancing loans
- Providing HFAs additional flexibility in how they utilize housing bond authority
- Simplifying how a borrower’s MCC benefit is calculated
- To find local housing assistance, please contact your state’s Housing Finance Agency (HFA).
- To learn more about NCSHA’s advocacy work in this area or to attend a related education event, complete the general inquiry form.
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