Housing Bonds

AAA

DEFINITION of 'Housing Bonds'

Debt securities issued by state or local governments to raise money for affordable housing development. Housing bonds sometimes require voter approval and are repaid out of the government's general tax fund or from an increase in the sales tax rate, income tax rate or property tax rate.


In addition to repaying the bond principal, the state or locality must pay interest on the money it borrows. Housing bonds typically have a low interest rate. For investors, the interest paid by housing bonds is exempt from federal and sometimes state income tax because housing bonds are a type of municipal bond. This tax exemption helps to compensate for the bonds' low interest rate.

INVESTOPEDIA EXPLAINS 'Housing Bonds'

Federal low-income housing tax credits are another source of capital that may be used instead of or in addition to housing bonds in order to finance affordable housing projects. Housing bonds are beneficial to the state as well as to private investors. On the one hand, the government gains access to a large amount of cheap financing. On the other, the tax advantages offered by housing bonds are highly attractive to those in the upper tax brackets.

RELATED TERMS
  1. Mortgage-Backed Revenue Bond

    A type of municipal agreement that pays holders based on revenues ...
  2. Bond Valuation

    A technique for determining the fair value of a particular bond. ...
  3. Tax Exempt

    To be free from, or not subject to, taxation by regulators or ...
  4. Default

    1. The failure to promptly pay interest or principal when due. ...
  5. Bond

    A debt investment in which an investor loans money to an entity ...
  6. Municipal Bond Fund

    A mutual fund that invests in municipal bonds, or "munis." Municipal ...
Related Articles
  1. Profit From Mortgage Debt With MBS
    Bonds & Fixed Income

    Profit From Mortgage Debt With MBS

  2. The Basics Of Municipal Bonds
    Bonds & Fixed Income

    The Basics Of Municipal Bonds

  3. Weighing The Tax Benefits Of Municipal ...
    Taxes

    Weighing The Tax Benefits Of Municipal ...

  4. Asset Allocation In A Bond Portfolio
    Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

comments powered by Disqus
Hot Definitions
  1. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  2. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  3. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  4. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  6. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
Trading Center