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MULTIFAMILY HOUSING BONDS
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The Washington State Housing Finance Commission issues both tax-exempt and taxable bonds to provide below market-rate financing to nonprofit developers and to for-profit developers who set aside a certain percentage of their units for low income individuals and/or families.
Tax-exempt bonds, also known as private activity bonds, are bonds where the interest earned by the bondholder(s) is exempt from federal taxation. Because the interest is tax-exempt, the debt has lower interest rates than traditional financing. The interest rate depends on the characteristics of the project and the rating of the bonds. The Commission issues two types of bonds: Multifamily Bonds and 501(c)(3) Bonds.
Tax-Exempt Multifamily Bonds
Multifamily bonds are subject to annual volume limits (“Bond Cap”) based on the state’s population. In 2006, the Commission allocated nearly $203 million in Bond Cap to multifamily housing projects across the state. Projects financed with Multifamily Bonds must have 5 units or more, be complete with kitchens and bathrooms, and have some units set aside as low-income units. More...
Low-Income Housing Tax Credit Combined with Tax-Exempt Multifamily Bonds
If more than 50% of a project is financed with tax-exempt Multifamily Bonds, the project may access the 4% Low Income Housing Tax Credit without competing for an allocation of LIHTCs. This program allows developers to combine low interest rates on long term debt with a substantial equity contribution from an allocation of LIHTCs. Nonprofit developers can take advantage of the benefits of LIHTCs by forming a partnership with a for-profit tax credit investor. More...
Tax-Exempt 501(c)(3) Bonds
Nonprofit 501(c)(3) bonds can be used to finance housing projects wholly owned by a 501(c)(3) organization, as long as the project fits within the charitable purpose of the organization. In 2006, the Commission issued nearly $257 million in nonprofit housing bonds. These bonds are not subject to annual Bond Cap limitations and cannot be combined with the LIHTCs. However, nonprofit 501(c)(3) bonds are less restrictive regarding the types of units allowed – individual units are not required to have complete kitchens or bathrooms, and there are generally no income restrictions placed upon the project. More...