Housing Authority Bonds

A short-term or long-term bond issued by state or local governments to help finance the construction or rehabilitation of affordable rental housing. Under certain programs, the proceeds from Housing Authority bonds may also be used to help low-income individuals and families purchase a home. The interest received by investors in these bonds is generally exempt from federal, state, and local income taxes.

Though Housing Authority Bonds have generally been viewed as very safe investments, their status with investors has declined some over the last decade. This change in public opinion has been due to numerous municipal financial crises as well ratings downgrades for many of the private companies that insure these bonds against default. Investors considering Housing Authority Bonds should pay close attention to the ratings of the individual bond issues, the municipality borrowing the money and the private third-party insurers.