House America Bond Might Not Address Long-term Issues

“A House America Bond for State Housing Finance Agencies: More Affordable Housing for Low- and Moderate-Income Households,” Jordan Eizenga, Center for American Progress, March 2012.

In this policy briefing, the Center for American Progress advocates for the creation of a House America Bond, a direct-subsidy but revenue-netural taxable bond program accessible to state housing finance agencies (HFAs) for funding low- and moderate-income mortgages and multi-family development. This program would build upon the stable lending performance of HFAs over the last 50 years and their critical role in financing tens of thousands of homebuyers and renters nationwide. It would open up an expanded taxable bond market, in the face of a dried-up tax-exempt one, by authorizing the federal government to make payments to the bond issuer to cover partial interest costs, ultimately lowering borrowing costs for eligible homebuyers and rental projects. This structure replicates the successful Build America Bond program for which HFAs were ineligible.

While a significant step toward immediately improving HFA liquidity in the face of crisis-driven credit-rating reductions and emaciated housing finance markets, the House America Bond may not be sufficient to address longer-term issues. For instance, conversations are still needed around reforming the tax-exempt bond system and increasing the private activity bond volume cap for housing activities. Furthermore, expanded federal government intervention in HFA business operations may muddy the waters of HFA credit ratings by introducing greater uncertainty about their managerial and political independence at a most inopportune time for doing so.

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