Ohio Legislation To Broaden Use Of Housing Bonds Goes to Governor
CHICAGO - The Ohio Senate took final action this week on legislation that would expand the ability of state and local governments to issue tax-exempt bonds for housing purposes.
The Senate's approval followed the House's adoption on Aug. 7 of a conference committee report on the legislation. The bill was sent to Gov. George Voinovich, who is expected to sign it into law, according to a press release from his office.
"This legislation will give housing groups and local governments throughout Ohio - in both urban and rural areas - new tools to ease the housing crunch," the governor said in the press release.
Key to the expanded housing program is the explicit use of general obligation, mortgage revenue, and industrial development bonds on the part of Ohio cities and counties, as well as an expanded ability to issue bonds on the part of the state.
However, all the new bonding authority required the Ohio General Assembly to set up guidelines or, in the case of the state's expanded authority, pass enabling legislation.
For the state, the legislation would expand the use of IDBs to include any multifamily rental housing. Before, the Ohio Housing Finance Agency was limited to using IDBs only for elderly rental housing. The bill would also expand the maximum maturity of the agency's bond issues to 45 years from 40 years. According to a Senate analysis of the legislation, the additional five years could be needed to secure federal mortgage insurance on a housing project.
The Ohio Housing Finance Agency will continue to have the ability to issue single-family mortgage revenue bonds under the legislation, according to a statement from the agency. Officials from the agency declined to comment further on the legislation.
For local governments, the bill would require the establishment of a local housing advisory board prior to the issuance of GO bonds for housing. The boards would review and give the governments advice on proposed housing developments.
Counties, which received the biggest expansion of bonding powers, were given minimal restrictions on their use in the legislation, according to Larry Long, executive director of the County Commissioners Association of Ohio.
He said the governments, which had been restricted from using bonds for housing, would now be able to issue GO, mortgage revenue, and industrial development bonds for public or private housing purposes. However, he pointed out that authority will be subject to certain income restrictions and in the case of the revenue bonds subject to inclusion under the state's private-activity cap.
Mr. Long said most of the interest in the new bonding authority was coming from the state's urban counties and from the Appalachian region of the state. He said one area of particular interest was the use of industrial development bonds for multifamily housing.
But he predicted that, at least initially, not many counties will be issuing GO bonds for housing because they would be reluctant to put their full faith and credit on the line for housing projects.
For Ohio cities the passage of the legislation will not mean a major expansion of bonding power, according to John Mahoney, assistant to the director of the Ohio Municipal League.
He said that cities, as home rule units of government under the state constitution, have always been able to use their GO bonding authority for housing. However, they were restricted from forming partnerships for housing developments with private entities. Now that housing is considered a public purpose in the constitution, he added, the use of bonds will be expanded to the realm of private housing built through public-private partnerships.
In addition, cities for the first time will be able to use IDBs for rental housing. But those bonds would be subject to the private-activity cap.
Still, Mr. Mahoney said he did not expect cities to rush to market with new housing bond issues.
"They only have X amount of dollars to pay bonds back," he explained. "It's not like they have new debt capacity. But, they have new options on how to finance deals and get new partners."
Mr. Mahoney said he expected most of the housing bond programs to be used by small, rural communities that need to build senior rental housing and from large cities facing homeless and affordable housing problems.
The passage of the legislation followed the adoption of a constitutional amendment last year that made housing a public purpose in the state. The so-called Issue I amendment, approved by 53% of the voters in November, also allowed the state and local governments to work with private and nonprofit organizations on a variety of housing programs. Prior to the passage of Issue 1 governments were prohibited from using their bonding authority for most housing projects that involved private entities, such as banks.