Innovative Bonds Help NYC Affordable Housing Developments

A look at the first social bond for affordable housing in the United States.

New York—New York Mayor Bill de Blasio’s “Housing New York: A Five-Borough, 10-Year Housing Plan” is designed to create or preserve 200,000 affordable homes over 10 years and is projected to cost more than $41 billion.

To help reach this goal, the New York City Housing Development Corporation (HDC) expects to fund nearly a quarter of that amount (or $11 billion) with its inaugural Sustainable Neighborhood Bonds transaction under its Multi-Family Housing Revenue Bonds program.

This is the first social bond for affordable housing in the United States. HDC has been the No. 1 issuer in the nation of mortgage revenue bonds for affordable multifamily housing in each of the last three years.

“Bond financing is a key funding source in many industries, including affordable housing, and has been a particularly critical tool for affordable housing activity in New York City,” Elizabeth Rohlfing, an HDC spokesperson, told MHN. “The need was to tailor a new MHRB product that more finely contextualizes the affordable housing it will fund within the broader goals of the overall community benefit, and we believe the Sustainable Neighborhood Bond achieves that goal.”

This new category of bonds also takes advantage of the growing interest in targeted social investment.

“As with most of our bonds, they will be priced in the market and the proceeds will be used to fund affordable housing loans,” Rohlfing said. “HDC has always issued bonds to promote affordable housing; this new category will make explicit the link between affordable housing and holistic neighborhood development and revitalization.”

The innovation aligns with not only the production goals of The Mayor’s housing plan, but also the vision the plan lays out for creating vibrant and sustainable neighborhoods.

“Housing is a catalyst for jobs, retail, transit, parks, schools, and all the services and opportunities that neighborhoods need to thrive,” Vicki Been, HDC’s chair and HPD commissioner, said. “Sustainable Neighborhood Bonds are emblematic of the goals of Housing New York, which seeks not only to finance the construction and preservation of 200,000 safe, quality, affordable homes, but to foster thriving and diverse neighborhoods.”

HDC expects to price approximately $680 million worth of Sustainable Neighborhood Bonds in mid-June, which will allow investors to invest directly in bonds that finance the new construction and preservation of affordable housing projects in New York City.

Certain developments financed with Sustainable Neighborhood Bonds will also receive allocations of federal low income housing tax credits, which may generate additional sources of financing for the construction or rehabilitation of those affordable housing projects.