State housing finance agencies saw an increase of 13.5% in debt issuance from 2023 to 2024, as rising prices and elevated mortgage rates pushed up the need for assistance, a new report finds.
The agencies work with lenders to provide federal loan assistance and other aid to borrowers, typically first-time single-family homebuyers and those of modest means.
“Part of the [higher] loan production is a result of very high mortgage interest rates,” said Nora Wittstruck, an analyst who worked on the S&P Global report.
The demand for assistance is often greater than the agencies can provide. Stockton Williams, the executive director of the National Council of State Housing Agencies, said HFAs are limited by a federally enforced cap on the amount of tax-exempt bonds states can issue each year.
“In many cases they could use more [bond authority] than they are getting and more than is available,” Williams said. “The only way to really change that, increase their capacity and do more tax-exempt financing would be to change the federal law.”
The council is pushing a legislative proposal to expand the amount of tax-exempt bond authority available to states for housing, which Williams argued has bipartisan support in Congress.
Specifically, they are calling on a new community development tax team formed by Republicans on the House Ways and Means Committee to remove mortgage revenue bonds and multifamily housing bonds from the private activity bond volume cap for a five-year period and to raise the cap on housing credit authority by at least 50%.
However, Williams is unsure about the proposal's ability to compete with others to get into a new tax bill.
Multifamily debt issuance is also higher than in years past largely due to the cost of construction for multifamily buildings, according to David Greenblatt, a director and lead analyst for S&P Global Ratings.
“As costs are higher, HFAs have to fund more of the gap or find other public subsidies to close the financing gap for certain deals,” Greenblatt said.