“It’s like getting a slight discount on a Ferrari and calling it affordable,” says Matt Schwartz, president of California Housing Partnership, an affordable-housing advocate.īe wary. And it’s doubtful whether the often-modest rent discounts being offered to middle-income tenants will ever make up for the lost tax revenue. For the cities and counties that will ultimately own the buildings, it means forgoing millions in property tax revenue for decades. Besides the front-loaded fees, these highly leveraged deals rely on rosy 30-plus-year recession-free forecasts. Not everyone is a fan of California’s housing-bond boom. “And these are some pretty nice buildings.” For a top tax bracket, especially a California investor, it’s pretty nice,” says John Miller, head of municipals at Nuveen, which has already slurped up some $800 million in bonds. “These are California exempt, and that’s a huge benefit because they’re also federally exempt. Then there are the sellers, like Equity Residential REIT and Lennar, getting top-dollar prices, and yield-hungry municipal-bond funds snapping up the 3% to 5% tax exempt debt as fast as it hits the market. Since 2019, more than $6 billion in muni bonds have been issued to acquire more than 35 upscale apartment buildings at nosebleed prices.īankers from firms such as Goldman Sachs and Jefferies, property managers like Greystar and white-shoe law firms are feasting on hundreds of millions in fees. Essential housing bonds issued by quasi-governmental agencies like CalCHA aren’t limited by state municipal volume caps and cleverly sidestep the bureaucratic red tape required for tax credit–based financing. Welcome to the most exciting innovation to hit the municipal-bond business in decades. “The key to success and scalability was governmental ownership.” “When we connected the dots, we had an ‘aha’ moment,” says Moss, who recently hosted Forbes on a tour of one of his purchases, the 342-unit Serenity in Larkspur, with two saltwater swimming pools and a yoga studio.
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