Multifamily Housing Revenue Bonds, also known as private activity bonds (PAB), enable affordable housing developers to obtain below-market financing because interest income from the bonds is exempt from state and federal taxes.
In addition, these bonds qualify developments for Federal tax credits.
The San Diego Housing Commission (SDHC) authorizes the issuance of Multifamily Housing Revenue Bonds, subject to the approval of the San Diego City Council, sitting as the Housing Authority of the City of San Diego (Housing Authority).
SDHC, the City of San Diego, and the Housing Authority are not financially liable for the bonds. Private sources of funds, such as revenue from the development, are used to repay the bonds.
SDHC’s Multifamily Mortgage Revenue Bond Program Policy includes eligibility requirements for the program, such as:
- A minimum of 20 percent of the units must be restricted to households earning up to 50 percent of Area Median Income (AMI); or
- A minimum of 40 percent of the units must be restricted to households earning up to 60 percent of AMI.
In addition, developments also must remain affordable for a 55-year period, and 95 percent of the tax-exempt bond proceeds must be allocated to capital costs associated with the development.
The Federal Tax Reform Act of 1986 (Section 1301) established a detailed set of rules to regulate the use of tax-exempt PABs and to restrict the funds created by the bond issuance (Section 146 of the Internal Revenue Code).
Federal law limits how much tax-exempt debt a state can issue in a calendar year (Annual State Ceiling) for private projects that have a qualified public benefit. The limit is determined by a state’s population, multiplied by a specified dollar amount.
The California Debt Limit Allocation Committee (CDLAC) allocates PABs in the State of California.
PABs are publicly offered or privately placed with bondholders.
Multifamily Housing Revenue Bonds have been issued by the City or Housing Authority since 1982.
SDHC’s Multifamily Mortgage Revenue Bonds Program was enacted in 1989.