S 1511119th CongressIn Committee

Affordable Housing Bond Enhancement Act

Introduced: Apr 29, 2025

Sponsor: Sen. Cortez Masto, Catherine [D-NV] (D-Nevada)

Standard Summary

Comprehensive overview in 1-2 paragraphs

The Affordable Housing Bond Enhancement Act, as introduced, would broaden the use of mortgage revenue bonds (MRBs) and related housing-financing tools under the Internal Revenue Code. Its core aim is to expand funding for affordable housing and housing improvements by giving states and issuing authorities greater flexibility with carryforwards, refinancing, and bonds tied to home improvements and mortgage credit certificates (MCCs). It also tightens some reporting and administrative requirements while shortening certain notice periods and allowing more flexible MCC credit calculations. Many provisions take effect for calendar years after enactment (with some applying to elections or refinancing loans beginning in 2025–2026 and beyond). In short, the bill seeks to spur more affordable housing investment by increasing financing options and flexibility for MRBs and MCCs, while adding reporting requirements to improve transparency for Congress and policymakers.

Key Points

1Expanded use and flexibility for carryforward bond authority
2- Allows issuers to move carryforwarded amounts within the same state and adjust the purposes for which carryforwards are used (e.g., housing-related uses), with limits to ensure bonds issued after carryforward occur aren’t counted against other limits.
3- Keeps an irrevocable election framework but creates housing-specific transfer and redesignation options, and lets states direct transfers under certain laws.
4Elimination of the refinancing limitation for MRBs
5- Refinancing a mortgage on a residence for an eligible mortgagor would not be treated as the acquisition or replacement of an existing mortgage for MRB purposes.
6- Uses the market value of the home at the time of refinancing for calculations under the special refinancing rule.
7Increase in financing limit for qualified home improvement loans
8- Raises the financing limit from $15,000 to $75,000 for qualified home improvements, with annual inflation adjustments after 2026.
9- Applies to loans issued after the end of the calendar year that includes enactment.
10Revisions to the recapture tax and holding period
11- Updates the holding period percentage schedule for MRB recapture to a 5-year framework (with a staged percentage by year) and 0% if the indebtedness is fully repaid earlier.
12- Shortens related timeframes in the MRB recapture provisions from 9 years to 5 years.
13- Applies to taxable years beginning after December 31, 2025.
14Modifications to the mortgage credit certificate (MCC) framework
15- Adds flexibility to MCC credit rates: 1% to 5% certificate credit rate, with possible variation year by year in the term of the mortgage.
16- Refines how the “average annual” certificate credit rate is calculated.
17- Applies to MCCs issued on or after the second calendar year that begins after enactment.
18Extension of MCC effectiveness period and revocation rules
19- Extends the period MCCs can be in effect (from the "second" year to the "fourth" year reference, under the bill’s revised structure).
20- Adds a mechanism to revoke an election to issue MCCs within a calendar year, with coordination rules to avoid pumping more bonds than allowed.
21Public notice and reporting requirements
22- Lowers the public notice requirement from 90 days to 30 days.
23- Eliminates the lender reporting requirement for MCCs and transfers reporting responsibilities to the issuing authority (with related conforming adjustments in tax code references).
24- Requires annual electronic reporting by issuing authorities and authorizes disclosure of certain volume-cap information to designated congressional committees.
25Reporting to Congress and transparency
26- Adds a new annual report to multiple congressional committees detailing state-by-state information on bonding authority, carryforwards, carryforwards that expired, private activity bonds issued, and related carryforward activity.
27Effective dates
28- Many provisions apply to calendar years beginning after enactment.
29- Some MCC-related changes apply to certain MCC issuances after the second calendar year beginning after enactment or later.
30- Specific carryforward and election-related changes become effective for elections under MRB rules after December 31, 2025.
31- Refinancing and funding-limit changes apply to loans and issuances after enactment.

Impact Areas

Primary group/area affected- State and local housing finance authorities and other issuers of private activity bonds (MRBs, MCCs, exempt facility bonds).- Homebuyers and homeowners seeking affordable housing, home improvements, or MCC-based tax credits.- Mortgage lenders and private sector issuers that participate in MCC programs and MRB financing.Secondary group/area affected- Tax-exempt private activity bond market participants and bond counsel.- State and local government budget officials who oversee volume caps and carryforwards.- Policymakers and researchers tracking housing finance, affordability, and tax expenditure.Additional impacts- Increased transparency and data collection on MRB usage through new annual reports.- Administrative and compliance adjustments for issuers (electronic reporting, revised credit calculations, public-notice timelines).- Potential shifts in how readily states can deploy MRB and MCC tools to finance affordable housing and home-improvement initiatives, possibly affecting private activity bond issuance volumes.

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