The California Housing Finance Agency (CalHFA) announced that it is ramping up its Bond Recycling Program with new partnerships with the cities of San Diego and San Francisco.
The local collaborations along with the recent use of nearly $50 million in recycled bonds to finance a pair of affordable housing developments in Los Angeles and Chico illustrate the program’s growing activities, according to the agency.
“CalHFA’s bond recycling program is an innovative approach to provide essential financing to support the creation and preservation of affordable housing in the city of San Diego and statewide,” said Richard C. Gentry, president and CEO of the San Diego Housing Commission.
“The San Diego Housing Commission is pleased to be among the first agencies in the state to collaborate with CalHFA on this important program.”
San Diego and San Francisco leaders approved the partnerships last month.
“Access to low-cost capital is a critical piece of the Mayor’s Office of Housing and Community Development’s (MOHCD) strategy to build new and preserve existing affordable housing,” said MOHCD director Eric Shaw. “We’re excited that the state is making additional resources available to invest in advancing housing opportunity in San Francisco.”
CalHFA launched the Bond Recycling Program last year with the help of Apple, which announced a $2.5 billion commitment to combat the state’s housing crisis. As part of that effort, Apple is supplying a credit facility, which allows CalHFA to preserve and reuse tax-exempt bonds that would otherwise have been retired to provide more financing for affordable housing projects.
CalHFA’s Bond Recycling Program will be even more relevant if the bond financing threshold is reduced from 50% to 25% as proposed in the the Build Back Better legislation that the U.S. Senate will take up soon, according to agency officials.
If less volume cap is needed for affordable housing projects to access tax credits going forward, it will allow California to stretch its resources further to finance more affordable housing, and recycling bonds is a key option to fill in gaps in tax-exempt debt financing.
Earlier this fall, CalHFA used recycled bonds to help finance the preservation of the Shermanaire Apartments in the Winnetka area of Los Angeles. The units were naturally affordable, but not rent restricted, before a financing package that includes $26.5 million in recycled bonds through CalHFA’s program that will allow for a rehabilitation. Developer Shermanair AGP will also expand the property from 82 to 90 units, and rents will be restricted between 50% and 80% of the area median income for the next 55 years.
In Chico, Pennant Development Partners is using $20 million in recycled bonds for the rehabilitation of the Cedar Village development. The project will extend affordability at the property for 55 years for senior residents in an area hard hit by the 2018 Camp Fire. The project features 116 units, which are made affordable through a combination of CalHFA’s rent restrictions and project-based vouchers.
“These two projects are perfect examples of how recycled bonds can be used to finance projects that preserve vital California housing units without using the state’s oversubscribed yearly volume cap or any other state resources,” said CalHFA executive director Tiena Johnson.
