McGuireWoods’ Robert Kaplan Writes About Low Income Housing in Tax Credit Advisor

May 13, 2024

Recent jumps in interest rates and construction costs have caused funding gaps for many multifamily affordable housing developers, but creative tax-exempt bond structuring techniques can free up more financing for such projects, McGuireWoods Washington partner Robert Kaplan wrote in a May 1 article he co-authored for Tax Credit Advisor. Kaplan is a member of the firm’s Public Finance Department.

The article explained how affordable housing developers claiming certain Low Income Housing Tax Credits can issue long-term bonds that bear interest at a lower rate during the construction and lease-up phase, and a higher rate after completion. When interest rates are high, as they are now, this “blended yield” structure can reduce the amount of money a developer might need to rebate to the IRS.

“In the current interest rate environment, the ability to blend yields in a cash-backed forward or two-series bond transaction may enable a borrower to retain certain investment earnings and apply them to qualified project costs, thereby narrowing funding gaps and increasing a project’s viability,” the authors wrote.