Housing Authority Bonds

  

Categories: Bonds

Municipal bonds are debt securities issued by local governments. Often they have specific purposes. Build a hospital. Fill in some potholes. Construct a sports stadium for a billionaire, so a bunch of millionaires can play a kids' game. That kind of thing.

Housing authority bonds target the construction of subsidized housing. The local or state governments issuing the bonds will sell the securities to investors, who get paid interest for their trouble.

Then the governments use the money raised to build rental properties, usually for low-income residents. It's a way to create subsidized housing without raising near-term taxes.

Related or Semi-related Video

Finance: What is the Federal Housing Aut...11 Views

00:00

Finance a la shmoop what is the Federal Housing Authority or FHA? alright so

00:09

before 1934 a whole bunch of homes were doing this leaving a whole bunch of [Home crumbles to the ground]

00:15

people well doing this then along came the National Housing Act of 1934 thank

00:21

you FDR which created the FHA which served to stabilize the process of

00:26

building and buying homes and you can imagine that Home Building is a big fat [A house of cards appears]

00:31

house of cards when it's not well-managed shoddy workmanship allows

00:36

homes to fail in the first breath of wind the wolves out there so that

00:40

insurance companies are loathe to pay when they fall and so banks then are

00:46

loathe to lend money to would-be home builders and buyers and would you

00:51

believe it before the FHA normal home loans were only three to five years like

00:57

you'd borrow at today's dollars say 200 grand to buy a home and you'd be

01:01

expected to pay it all off in just a few years yeah the greatest generation they

01:06

were tougher than we are today they could actually do that so who could

01:09

afford to buy a home yeah pretty much nobody, nobody but the rich already rich

01:13

yeah so nobody then in that environment does a whole lot of nothing and a lot of [Man discussing home buyers]

01:18

people were very homeless and very unhappy and if you think about the way

01:22

wealth has been created in this country a lot of it's been through or even most [Young man and woman taking down a for sale sign]

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of it's been through homeownership so in those days people really didn't have the

01:29

opportunity it was not a fair world well the FHA set basic standards that

01:33

serve to improve building and housing conditions so that everyone wasn't

01:37

susceptible to you know the big bad wolves huffing and puffing and a home as [Wolf walks past house and blows it down]

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long as it wasn't made of straw actually had a chance of staying intact for a few

01:46

years and this was possible this was not high-tech look at Europe the homes they

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have there or three four five hundred years old built out of brick Union labor

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or non-union labor I guess with the king and they're doing just fine so go Europe! [Man holds up EU flag]

01:59

yeah you have to win one every now and then and now the typical home loan in

02:03

America anyway is about 30 years rather than three to five giving everyone ample

02:08

opportunity to pay hundreds of thousands of dollars in interest over the course

02:12

of repayment and the FHA sprays WD-40 on the tracks [Peron sprays WD-40 on train tracks]

02:16

of the banks you know who are then a lot more willing to loan that money and make

02:20

a whole lot more money for themselves thank you American capitalist system so

02:24

yeah thank goodness auto-pay came around so that you don't have to feel pain

02:29

every month when you write that mortgage check you know just ask everyone who

02:33

owns a home feels it and we feel your pain

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