Affordable Housing Financing Guide

Tax-Exempt Bond Financing for Affordable Multifamily

Private activity bonds issued by a local, regional, or state housing finance agency finance the construction phase, automatically qualify the project for the 4% credit, and can convert to permanent debt at stabilization. The practical floor is around $15M in total development cost because issuance costs, legal, credit enhancement, issuer fees, don't scale down efficiently below that, which is why bond financing shows up almost exclusively on the larger end of the affordable deal spectrum.

Typical Deal Size$15M to $100M+ total development cost
Affordability Covenant55 years, often longer depending on issuer
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The Capital Stack

Most Tax-Exempt Bonds deals layer several sources rather than a single loan:

Two closings, not one, unless you structure it right

The default bond structure closes construction financing and permanent financing separately, with a conversion event at stabilization. Sponsors who want single-close certainty pair the bond with a HUD 221(d)(4) first mortgage instead, trading some structuring flexibility for one closing date and one set of legal costs rather than two.

Credit enhancement drives the real cost of capital

Bonds are typically issued as variable-rate demand obligations backed by a letter of credit, or as fixed-rate bonds with bond insurance. The credit enhancement provider, not just the coupon on the bond itself, is where the real negotiation happens, and it's the piece most sponsors underestimate when they compare a bond quote to a straight bank construction loan.

For the full program mechanics, see our deeper guide: Program Deep Dive →

Where We're Active

Tax-Exempt Bonds Financing, By Market

Local financing guides for the markets where we're actively tracking Tax-Exempt Bonds deal flow.

Sacramento

Tax-Exempt Bond Financing for Affordable Multifamily in Sacramento.

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Los Angeles

Tax-Exempt Bond Financing for Affordable Multifamily in Los Angeles.

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San Jose

Tax-Exempt Bond Financing for Affordable Multifamily in San Jose.

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San Bernardino

Tax-Exempt Bond Financing for Affordable Multifamily in San Bernardino.

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Frequently Asked Questions

Do all bond-financed deals automatically get the 4% credit?

Yes, that coupling is the core mechanic. A project financed with qualifying tax-exempt private activity bonds automatically receives the non-competitive 4% credit, no separate scoring process.

Who actually issues the bonds?

Local housing authorities, regional joint powers authorities, and state housing finance agencies are the most common issuers, each allocating private activity bond cap annually against its own calendar and criteria.

What's the affordability covenant on a bond-financed deal?

55 years at minimum, matching the LIHTC baseline, and some issuers extend it further as a condition of the bond allocation.

Can bond financing work on a deal under $15M?

It's possible but rarely pencils. Issuance costs are largely fixed regardless of deal size, so smaller deals usually get better economics from the 9% credit instead of bond-coupled 4% financing.

Have a Tax-Exempt Bonds deal?

Send us the site, the program you're targeting, and where it stands today. We'll come back within 24 hours with the lenders who actually close this structure and the stack we'd recommend.

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