Housing impact bonds to backstop NYCHA

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The New York City Housing Development Corp. plans to issue $375 million of housing impact bonds, a new category of sustainable development bonds.

The Series 2020 bonds will finance the preservation and rehabilitation of 2,625 New York City Housing Authority homes across 37 tenant-occupied public housing buildings and two non-residential community centers throughout Brooklyn, the corporation said in a statement Friday.

According to HDC, the resolutions were created as part of a public-private partnership, the city's Permanent Affordability Commitment Together, or PACT, which aims to convert at least 62,000 public housing units to Section 8 rental housing developments by the end of 2028. PACT is a key component of the city’s 10-year strategic plan to repair public housing while ensuring permanent affordability, guaranteeing tenant protections, and maintaining public ownership of the land and buildings.

The inaugural issuance, with retail and institutional pricing scheduled for Feb. 3 and 4, respectively, includes $296.4 million in tax-exempt bonds under Series 2020 A and $78.6 million in federally taxable bonds under Series 2020B. Proceeds will be dedicated to two 2020 PACT mortgage loans which, according to HCDC, will respectively be secured by a standby credit enhancement from Freddie Mac and funding agreement from HDC.

Jefferies is lead manager. Moody's Investors Service has assigned both series Aa2 ratings. Closing is expected for Feb. 12.

The bonds are designated as sustainable development bonds consistent with the goals of the International Capital Markets Association’s social bond principles to end poverty and to make cities inclusive, safe, resilient and sustainable. All units to be funded serve low-income households at or below 60% of area median income.

“This innovative investment tool will help to rehabilitate and secure affordability of New York City’s precious public housing stock,” HDC President Eric Enderlin said.

Deputy Mayor for Housing and Economic Development Vicki Been credited NYCHA, HDC and the latter's sister agency, the Department of Housing Preservation and Development, for "thinking outside the box."

NYCHA, long a strain on city operating and capital budgets and with a track record of fiascoes and mismanagement, is operating under a federal monitor, Bart Schwartz. Its capital-needs backlog is $32 billion over five years and $45 billion over 20, according to its most recent assessment.

NYCHA's well-headlined woes have prompted a raft of suggestions for how best to rebuild the agency and earmark funds. NYCHA serves 400,000 residents, or 5% of the city's population, in 175,000 apartments.

The creation of the monitor marked a compromise between the city and the U.S. Department of Housing and Urban Development in January 2019 and settled a lawsuit by tenant groups. It did not involve a full federal takeover of NYCHA, which HUD had threatened.

Podcast: Time to act on NYCHA. Regional Plan Association's Moses Gates talks to Bond Buyer Northeast Regional Editor Paul Burton. https://www.bondbuyer.com/podcast/time-to-act-on-nycha

Think tank Regional Plan Association, in its October report, “Time to Act: Restoring the Promise of NYC’s Public Housing,” called for sweeping changes. It warned of “demolition by neglect.”

RPA called for making NYCHA the centerpiece of New York’s housing plan, enabling the authority to tap the resources of HPD and HDC.

HDC, the nation’s largest municipal housing finance agency, helps finance the creation or preservation of affordable housing under Mayor Bill de Blasio’s Housing New York plan. Since 2003, HDC has financed more than 184,000 housing units using over $24.2 billion in bonds and other debt obligations, and provided more than $31 billion in subsidy from corporate reserves and other available funds the corporation holds.

HDC ranks among the nation’s top issuers of mortgage revenue bonds for affordable multi-family housing on Thomson Reuters’ annual list of multifamily bond issuers. In each of the last five consecutive years, HDC’s annual bond issuance has surpassed $1.6 billion.

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Affordable housing bonds Public-private partnership Primary bond market New York City Housing Development Corporation New York City Housing Authority City of New York, NY New York