2A —February 2023 — M id A tlantic Real Estate Journal
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman AVP, Conference Producer ...........................Lea Christman Conference Producer .........................................Matt Wolpe Editor/Graphic Artist ......................................Karen Vachon Contributing Columnists ..................Joe Coradino, PREIT; Samantha Hoyte, CPA, MBA, CFE, Withum; Caroline Shelly, HF Planners, LLC; Michael J. Sladki, P.E., ECS Mid-Atlantic Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 35, Issue 2
Samantha Hoyte, CPA, MBA, CFE
Tax-Exempt Bond Financing for Affordable Housing
tate and local govern- ments, based on volume caps established by the federal government, are able to issue tax-exempt housing bonds. The proceeds of these bonds are used to finance mortgages for, among other uses, the production of af- fordable housing. Tax-exempt bonds are those where the in- terest paid to the bondholders is exempt from federal income tax and, in certain situations, state and local taxes as well. This tax benefit tends to result in a higher market price for the bonds, ultimately result- ing in lower interest rates for the mortgages financed by these bonds. The proceeds of these bonds can be used to finance one mortgage or many project mortgages. Issuance of this tax-exempt financing allows the project to apply for 4% low-income housing tax credits (LIHTC) on an “as-of-right ba- sis” and does not preclude the S
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project from receiving other government subsidies that are allowed for qualified projects. There are costs a property will incur for the mortgage including, but not limited to, bond counsel fees, trustee fees, issuer’s fees, underwrit- ing fees, etc. These costs vary depending on the specific transaction and normally are a percentage of the mortgage loan. Just as with any financ - ing, there are multiple steps to close on tax-exempt mort- gages. The most important first steps are: 1. A preliminary sources- and-uses schedule determin- ing how much financing is
needed for the project and how much will be supplied by tax- exempt financing; and 2. Securing the right devel- opment team to assist with the process. It is always important to ensure there is an efficient team for the process as well as ensuring requirements for applying for and closing tax-exempt bond financing are met. There are also a variety of tax-exempt bonds such as private activity bonds, exempt facilities bonds and other gov- ernment programs that allow for tax-exempt bond financing. Each bond has a specific set of continued on page 12A
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