Developer Progams

HCHFC issues multi-family revenue bonds to help finance the development of multi-family housing projects. By offering lower-cost tax-exempt financing, the HFC plays a crucial role in facilitating the completion of affordable housing projects. In addition, the HFC’s support in securing Low Income Housing Tax Credits allows for the negotiation of terms that align with housing goals. HCHFC serves as general partner on developments to ensure long-term affordability.

The corporation funds its activities by charging fees to developers who apply for financing, as well as through closing fees and ongoing charges.

How the Process Works

Under Texas Local Government Code, Chapter 394, HCHFC is authorized to issue revenue notes and bonds to finance multi-family rental residential developments that are primarily (at least 90%) intended for occupancy by individuals with low and moderate incomes.
The bond issuance process typically begins with obtaining an inducement resolution and agreement from the Issuer, often referred to as a declaration of official intent (the “Inducement”). This agreement represents the Issuer’s preliminary commitment to issue bonds for the proposed project.
Application
Inducement Resolution
Notice of Public Hearing
Public Hearing
Bond Resolution
Approval of Applicable Elected Representative
Other Approvals (e.g., volume cap allocation)

*Image courtesy of Stifel Nicolaus.

Tax Credit and Bond Basics

LIHTCs are an indirect federal subsidy granted on a “but for” basis, meaning the investment would not be financially viable without the credits.

These credits are designed to incentivize private developers and investors to build and preserve affordable housing.
Tax credits are provided over a 10-year period.
Typically, LIHTCs are syndicated, meaning they are sold to investors. Syndicators may include specialized Affordable Housing Tax Credit Syndicators, investment/commercial banks, and private equity firms.
Properties receiving LIHTCs must comply with federal restrictions for at least 15 years, and under the Texas Department of Housing and Community Affairs (TDHCA) statute, an additional restrictive period of at least 30 years is required.

How Private Activity Bonds promote affordable development

Private Activity Bonds (PABs) are typically issued by the HCHFC, which loans the bond proceeds to developers to finance the construction or rehabilitation of rental housing intended for low- and moderate-income individuals and families.

Tax-Exempt Financing: The issuance of tax-exempt bonds allows the HFC to assist developers in securing lower financing costs.
Lower Borrowing Costs: The lower interest rates on tax-exempt bonds reduce the developer’s overall borrowing rate compared to conventional taxable financing.
Access to 4% LIHTC: Developers can access 4% Low-Income Housing Tax Credits, which can cover up to 30% of the total project costs.
Bond Payments: The payment of bonds is generally limited to the revenues from the project (trust estate) or other pledged securities (such as a mortgage).
No Debt for State or Local Governments: These bonds are not considered a debt and do not create any moral obligation for the State of Texas or Harris County.
Conduit Financing: The HCHFC issues bonds as a “conduit” issuer, meaning the borrower, lender, and issuer are separate entities. The State, County, or other political subdivisions are prohibited from making payments on the HFC’s bonds.