How Tax-Exempt PABs Promote Affordable Housing
Aaron Marzwell is an established real estate executive and developer with a proven track record of leading several real estate businesses. He formerly led CIM Group for seven years, during which he oversaw the development of numerous real estate projects. Aaron Marzwell currently leads APPA Real Estate, which emphasizes impact investing and workforce housing, as well as providing housing at affordable rates.
According to the California Statewide Communities Development Authority (CSCDA), many affordable housing projects in the US are capitalized through loans. One category of debt securities primarily used in this capacity is private activity bonds (PABs). PABs allow investors or bond holders to borrow entities their money in favor of municipality-qualified projects with public benefits. PABs are encouraged by the government and issued by financial institutions to private entities that are looking to develop projects that can benefit a region. Affordable rental housing is one of these projects.
In tax-exempt PABs, investors borrow their money from private entities through financial institutions, and the money they gain due to bond interest is not included in their tax statements. In other words, tax-exempt PAB bond holders won’t pay tax for capital gains associated with the service. For this reason, many investors consider PABs as an efficient tax minimization strategy. This means private entities can easily obtain loans for their affordable housing projects.
Originally published at https://aaronmarzwell.blogspot.com.
