General Legal Framework

AuthorAlysse Hollis - Richard M. Froehlich
Pages1-8
There are two main types of tax-exempt bonds that can be used
to nance affordable multifamily housing projects: governmental
bonds and private activity bonds. In general, governmental bonds
are tax-exempt bonds that are issued to nance projects owned
by a governmental entity. Multifamily housing projects nanced
with governmental bonds must comply with rules that limit the
extent to which private businesses participate in the operations,
use, ornancing of those projects.
Private activity bonds are tax-exempt bonds that are used
to nance projects owned by private businesses, including not-
for-prot or “501(c)(3)” organizations. There are two main
subcategories of private activity bonds that are used to nance
multifamily housing projects. They are “501(c)(3) Bonds” and
“Qualied Exempt Facility Bonds.” “Qualied 501(c)(3) Bonds”
are limited to only those multifamily housing projects that will be
owned by 501(c)(3) organizations, while Qualied Exempt Facil-
ity Bonds may be used to nance multifamily housing projects
owned by any private business, governmental entity, or 501(c)(3)
organization.
There are several benets to using tax-exempt bonds to nance
multifamily housing projects. One of them is providing access
to lower interest rates than are available for conventional or
“market-rate” debt products. As we will discuss in Chapter 4, as
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General Legal Framework 1
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