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The Charlotte Housing Authority (CHA)
will provide bond financing for multifamily housing
development through issuance of 501(c)(3) bonds and
Private Activity Bonds. CHA's preference is that proposed
deals for issuance have credit enhancement through a
recognized lender/credit enhancement provider. CHA will
consider issuing bonds for non-credit enhanced transaction,
subject to underwriting and credit review.
501(c)(3) Bonds
The 501(c)(3) bond program was developed
to provide financing for multifamily housing. By definition,
the owner must be a government entity or have nonprofit
status meaning the organizations must meet the requirements
of Section 501(c)(3) of the Internal Revenue Code. These
bonds require no allocation of private activity bond
volume cap or other resources and there are no limitations
on the amount of the bond proceeds which can be used
for the acquisition of land and existing facilities.
Bond interest rates with this program are equal to or
better than to other tax exempt bond rates, but in markets
where income levels are lower, additional subsidies
may be needed ensure that the project is economically
feasible. Unlike private activity tax-exempt bonds,
low income housing tax credits are not compatible with
501(c)(3) bond financing.
Private Activity Bond
(also known as Tax Exempt Bonds)
Private Activity Bonds are bonds issued
by or on behalf of the state or local governmental entities
for the benefit of a private company. The purpose is
to provide special financing benefits for qualified
projects. These bonds are used to attract private investment
for projects that have some public benefit. Interest
on the bonds is generally exempt from federal income
taxes for investors, which typically result in lower
long term interest rates to the borrower.
Within the housing arena, tax exempt
bonds can be combined with 4% federal low income housing
tax credits. The North Carolina Housing Finance Agency
reviews tax exempt bond/4% credit deals for allocation
annually. See their website (www.nchfa.com)
for details on application timing and requirements.
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