- More than 180 investors have committed capital to a fund leveraging tax-exempt municipal bonds for affordable housing.
- NewPoint integrates bond buying, construction lending, and GSE-backed mortgages into a single structure.
- The model cuts interest rates by more than 100 basis points through Fannie Mae and Freddie Mac guarantees, enabling more affordable rents.
A Unified Approach To Housing Finance
NewPoint Real Estate Capital, in a joint venture with Morgan Properties, has secured $350M for a new affordable housing fund backed by municipal bonds, reports GlobeSt. The move signals strong investor appetite for alternative capital structures. It comes at a time when traditional financing options are becoming more limited.
This fund revives and modernizes a long-standing financing tool: tax-exempt municipal bonds. While these bonds have historically supported affordable housing, the innovation lies in how the funding is structured. The new approach combines bond proceeds, construction loans, and government-sponsored enterprise (GSE) guarantees into a single, streamlined platform.
How It Works
NewPoint serves as the bond purchaser, construction lender, and GSE mortgage lender. This integrated role allows for a smoother transition from construction to permanent financing. The bonds are issued with 18-year terms and currently carry interest rates in the low 5% range. Once a project achieves target occupancy, it becomes eligible for GSE-backed mortgage securitization, similar to CMBS structures.
By integrating with GSEs like Fannie Mae or Freddie Mac, borrowers can access interest rates of around 5.25%. In comparison, conventional loans typically come with rates closer to 6.5%. This cost savings helps make rents more affordable for tenants. Repayment of the bond is covered by income generated from the housing developments over time.
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Back In Demand
Following a lull after the 2008 financial crisis, this capital strategy is making a comeback amid higher rates and tighter credit markets. Firms like PIMCO have explored similar models, but NewPoint sets itself apart with its all-in-one structure, making it a standout in the space.
Why It Matters
The fund offers investors a stable, long-duration asset with a favorable risk profile while directly addressing the growing US affordable housing gap. “This is how you finance affordable housing in America,” said Rob Wrzosek, NewPoint’s president of affordable strategies.
With both public and private stakeholders searching for scalable solutions to housing shortages, integrated municipal bond models like this may represent a new standard for affordable housing finance.
