Abstract
State and local housing finance agencies (HFAs) issued over $50 billion of mortgage revenue bonds (MRBs) from 1982 to 1986 to finance subsidized mortgages for first-time home buyers. The funds from these bonds financed several hundred thousand mortgages and cost the federal government about $7.5 billion (measured in present value) in lost tax revenue. Since 1986, when a volume cap was placed on private-activity tax-exempt bonds, including MRBs, HFAs have issued over $25 billion of new-money MRBs, depriving the federal treasury of additional revenue. According to the President’s 1992 Budget, outstanding MRBs cost taxpayers about $1.7 billion in fiscal 1992. This revenue loss did not include the efficiency loss from diverting capital from other uses to housing.
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