Understanding the Nuances of Multifamily Bond Volume Cap Recycling

In an affordable housing landscape where optimism and creative solutions are more important than ever, private activity bond (PAB) volume recycling can be an attractive device for developers competing in an oversubscribed bond market. Bond volume recycling refers to a funding scheme where a bond issuer can recapture PAB volume from bond issues that are paid off early or paid down at conversion to a permanent loan phase and use that volume for another affordable residential housing project under Section 142(d) of the U.S. Code.

At present, only a handful of states have recycling programs, including New York, California, Colorado, Illinois, and Washington. The common denominator among these jurisdictions is the concentration of a large portion of the multifamily PAB volume and bond issuance within just one or two agencies.