Housing Bonds

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.

BREAKING DOWN '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. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Mortgage-Backed Revenue Bond

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

    A technique for determining the fair value of a particular bond. ...
  4. Default

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

    To be free from, or not subject to, taxation by regulators or ...
  6. Private Purpose Bond

    A type of municipal bond that is issued to finance a project ...
Related Articles
  1. Bonds & Fixed Income

    Profit From Mortgage Debt With MBS

    Mortgage-backed securities can offer monthly income, a fixed interest rate and even government backing.
  2. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Taxes

    Weighing The Tax Benefits Of Municipal Securities

    Find out how to determine whether the tax exemption offered by "munis" benefits you.
  4. Bonds & Fixed Income

    Asset Allocation In A Bond Portfolio

    An investor's fixed-income portfolio can easily beat the average bond fund. Learn how and why!
  5. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  6. Investing News

    AQR Capital Management: Investment Manager Highlight

    Discover the investment strategies and secrets of hedge fund powerhouse AQR Capital Management LLC in the alternative investment space.
  7. Investing News

    Performance Review - U.S. Fixed Income in 2015

    Review the performance of the U.S. fixed-income securities in 2015, from the relatively strong U.S. municipal bond market to the calamitous high-yield space.
  8. Bonds & Fixed Income

    Do Long-Term Bonds Have A Greater Interest Rate Risk Than Short-Term Bonds?

    The answer is yes, and there are two main reasons why.
  9. Bonds & Fixed Income

    Comparing Yield To Maturity And The Coupon Rate

    Investors base investing decisions and strategies on yield to maturity more so than coupon rates.
  10. Investing News

    Natixis Global Asset Management: Investment Manager Highlight (NTXFY)

    Read about the investment operations of Natixis Global Asset Management, a multiaffiliate manager with $870 billion in worldwide assets under management.
RELATED FAQS
  1. Besides a savings account, where is the safest place to keep my money?

    Savings accounts are safe because investors' deposits are guaranteed by the Federal Deposit Insurance Corporation (FDIC) ... Read Answer >>
  2. What are the maximum Social Security disability benefits?

    Find out the maximum Social Security disability benefits for qualifying individuals and couples in 2015, including who is ... Read Answer >>
  3. How do I calculate the future value of an annuity?

    Find out how to calculate the future value of an ordinary annuity or an annuity due, including how the power of compounding ... Read Answer >>
  4. Have hedge funds eroded market opportunities?

    Learn why there is still plenty of opportunity for investors even though hedge funds have grown substantially. Read about ... Read Answer >>
  5. Are high yield bonds a good investment?

    Invest in high-yield bonds through mutual funds, exchange-traded funds or closed-end funds, leaving the job of finding a ... Read Answer >>
  6. What is the relationship between the current yield and risk?

    Discover the relationship between a bond’s current yield and risk, and how investors can use it to benefit their overall ... Read Answer >>
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  3. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  4. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  5. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  6. Economies Of Scale

    Economies of scale is the cost advantage that arises with increased output of a product. Economies of scale arise because ...
Trading Center