Private Activity Bond Financing

Private Activity Bond Financing

Tax-exempt private activity bonds are a hugely important source of financing for housing development in New York City. The state and city housing agencies issue bonds and use the proceeds from the sales to make loans to developers to build housing. As developers make payments on their loans back to the housing agencies, the latter repay the bondholders.

But this seemingly straightforward financing system is complicated by a variety of federal and state regulations. On the federal side there is an annual cap on the total volume of tax-exempt private activity bonds that can be issued in each state (the “volume cap”), as well as affordability requirements attached to the use of these bonds to finance housing. State law regulates how the “volume cap” will be allocated among economic development and housing agencies, among others, up and down the state.

CHPC’s Private Activity Bond Financing project will shed light on the inner workings of tax-exempt private activity bond financing in order to help policymakers understand better what has often been an obscure -if crucial- source of funding for housing.

 

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  • Volume Cap explained in video

    Over 49,000 units of affordable hosing were financed using tax-exempt private activity bonds in New York City between 2005 and 2013. It is a critical resource for the development of affordable housing in our city, yet one that remains a bit of a mystery for many in the development community.

    CHPC’s study Pump Up The Volume took the first deep look at the use of tax-exempt private activity bonds and proposed a series of recommendations to improve the allocation of bonds to support housing development. For those who just need of a simple explanation on what are tax-exempt private activity bonds and what is the volume cap, CHPC has put together this video to answer these basic questions.

     

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  • New Report: Pump Up the Volume

     

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    PUMP UP THE VOLUME: Recommendations to Improve the Allocation of Private Activity Bonds to Better Support Housing in New York State

    Over 49,000 units of affordable housing have been created in New York City using tax-exempt private activity bonds (PABs) in the past nine years, and this resource will continue to be an important component for Mayor De Blasio’s Housing Plan to be a success.

    However, while information on other City, State and Federal housing resources is readily available, there has been limited publicly available information on the allocation, demand and use of PABs in New York State.

    The total PAB volume cap in the State between 2005 and 2013 was $15.4bn. This study reveals that during this period the City and State issued a total of $13.4bn in PABs for housing. Industrial Development Agencies, in contrast, issued $1.6bn over the same nine years.

    In light of this disparity, why does State legislation prioritize economic development over housing in determining which agencies will receive bond allocations? Why is there no public reporting on the PAB allocations made to each agency and the bonds actually issued? How does this impact the ability of housing agencies to plan their project pipelines and how do they make the decision to select the projects which will receive financing?

    Our research study shows that multifamily housing makes for the best use of PABs, in part because it leverages Low Income Housing Tax Credits and in part because housing is often the only feasible use of PABs due to onerous requirements that limit their usefulness for economic development.

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State reports offer new insights on volume cap!

In June 2016, the New York State legislature renewed the Private Activity Bond Allocation Act (PABA) for two more years. The renewal included two significant amendments recommended by CHPC in our report Pump Up the Volume: moving the recapture date earlier in the calendar year, and providing transparent information on the use of volume cap throughout the State. The recapture date was changed from October 15 to September 15, and the State is now required to make public three separate reports on how volume cap is used.

The first of these reports came out in September 2016. It shows …

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New law brings transparency to volume cap allocations

report

On June 30, 2016 Governor Cuomo signed into law Assembly Bill 10255 to renew the Private Activity Bond Allocation Act for two more years. The new law is almost identical to the expired law but makes two significant changes: the bill moves the recapture date forward from October to September and adds some key provisions that will bring reporting and transparency to the volume cap allocation process.

Both changes seem borrowed straight out of CHPC’s 2014 report Pump Up the Volume! CHPC recommended moving the recapture date from October to July and requiring the State to “publicly report

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Volume Cap explained in video

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Over 49,000 units of affordable hosing were financed using tax-exempt private activity bonds in New York City between 2005 and 2013. It is a critical resource for the development of affordable housing in our city, yet one that remains a bit of a mystery for many in the development community.

CHPC’s study Pump Up The Volume took the first deep look at the use of tax-exempt private activity bonds and proposed a series of recommendations to improve the allocation of bonds to support housing development. For those who just need of a simple explanation on what are tax-exempt private activity …

Read more

Bond Financing & Volume Cap Workshop

NYSAFAH- Building for the Future Conference

Wednesday, May 13, 2015
10:30-11:30am

This session will discuss best uses of volume cap and new structures being used to support HFA and HDC bond allocations. CHPC’s “Pump Up the Volume” report recommendations will provide the basis for discussion.

Moderator: Jerilyn Perine, CHPC

Panelists:
Richard Gerwitz, Citi
Gary Rodney, NYC HDC
Marian Zucker, NYS HCR

You must register for the conference to attend workshop sessions. Register for the conference here.

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Private Activity Bond Panel

Yesterday morning’s breakfast panel on Private Activity Bonds (PABs) in New York was a great success. Over 50 professionals from the housing and finance sectors came together to hear more about our report, Pump Up the Volume: Recommendations to Improve the Allocation of Private Activity Bonds to Better Support Housing in New York State.

 

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The CHPC study is the first to examine how PABs are used in New York State, thanks to data provided by government agencies and to public records on bond issues. The study highlights the importance of PABs for housing development despite a bond allocation process …

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Breakfast Panel: Private Activity Bonds in New York

 

Volume_Cap_Panel

Please join us the morning of Wednesday, March 18th for a breakfast panel discussion on the allocation and use of tax-exempt private activity bonds for housing, following our Pump Up the Volume report.

To register for the event, please RSVP here.

Panel Members:

Richard Gerwitz, Citibank

Marvin Markus, Goldman Sachs

Joan Tally, Morgan Stanley

Panel Moderator:

Richard Roberts, Red Stone Equity Partners

 

See the full report here.

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New Report: Pump Up the Volume

 

city cropped

PUMP UP THE VOLUME: Recommendations to Improve the Allocation of Private Activity Bonds to Better Support Housing in New York State

Over 49,000 units of affordable housing have been created in New York City using tax-exempt private activity bonds (PABs) in the past nine years, and this resource will continue to be an important component for Mayor De Blasio’s Housing Plan to be a success.

However, while information on other City, State and Federal housing resources is readily available, there has been limited publicly available information on the allocation, demand and use of PABs in New York State.

The …

Read more

80/20 program restructuring

In January 2014 the State Housing Finance Agency (HFA) announced a significant change in its 80/20 program, which offers developers low-cost financing for market-rate projects where 20% of the units are set aside as affordable housing.

Until recently, 80/20 housing developments could benefit from tax-exempt private activity bond financing for the full development costs as long as they set aside 20% of the units for households earning up to 50% of AMI. Under the new policy, HFA will only issue bonds to provide low-cost financing for 20% of the development costs. In other words, low-cost financing will only be available …

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