"Across California, cities have signed on to a financing plan in which market-rate apartment buildings are bought and supposedly re-rented at rates affordable to teachers, nurses, and other middle-income workers. Instead, the deals often financially enriched bond investors and developers while delivering meager rent discounts and causing local governments to lose millions in property taxes, an investigation by this news organization found."
"Bond-financed middle-income housing deals first started in California around 2019. In these deals, a private sponsor typically a developer or real estate investor identifies market-rate property to buy, then partners with a state agency that can issue municipal bonds debt issued by state and local governments. The agency issues the bonds and becomes the property's owner. The project sponsor is paid a fee for its work arranging the deal. Because the property is then owned by a government agency, it becomes exempt from property taxes."
Cities purchased market-rate apartment buildings using municipal bonds to re-rent units at middle-income rates for teachers, nurses, and similar workers. Those deals frequently enriched bond investors and developers, produced small rent discounts, and caused local governments to lose millions in property taxes. Oakland is revisiting the program amid rising rents and plans to apply lessons learned from other cities by adding guardrails and foundational standards. The two central issues are accurately capturing public benefit and ensuring financial sustainability. Bond-financed deals involve private sponsors partnering with state agencies that issue bonds and assume property ownership and tax exemptions.
Read at www.mercurynews.com
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