Why they matter: General obligation bonds
Developing and rehabilitating houses is a proven solution for communities seeking to support the preservation of affordable homes for all residents, regardless of their income.
General obligation bonds offer a flexible way to finance a wide range of affordable housing activities, such as home construction, repair programs and down payment assistance. State or local governments implement general obligation bonds to raise funds for projects that serve public needs. General obligation bonds are a special type of debt that is typically funded through a jurisdiction’s general fund or dedicated tax, and they can be tailored to meet a community’s unique housing needs.
Why are general obligation bonds effective?
General obligation bonds give the community an opportunity to preserve affordable housing through the thoughtful development and rehabilitation of homes in communities of need. General obligation bonds enable local governing bodies to increase the supply and preservation of affordable homes by:
- Developing dedicated funding for local and state housing initiatives.
- Optimizing general fund appropriations for housing.
- Adopting multi-year, general obligation housing bonds.
- Establishing and expanding state housing tax credits.
- Creating new resources to support homes for those with the lowest incomes.
- Increasing the availability of housing vouchers to make existing homes affordable.
Who decides how general obligation bonds are used?
These bonds can be administered by cities or counties, but state governments can still impose overarching rules for how bonds are approved and used. General obligation bonds are the most successful when jurisdictions plan to make a large investment in a few, targeted housing programs, rather than requesting support for the entirety of their housing activities.
Policy in action
In some instances, the majority vote required to pass general obligation bonds can be greater than what has been required in prior elections, making it even more challenging to get them passed. For example, San Franciscans passed Proposition A – a $310 million bond for affordable housing – in November 2015 after 74% of voters supported the bond in a special election that required at least 67% of the votes for it to pass.
How are general obligation bonds approved?
The approval process varies from state to state and in every local municipality. When developing a general obligation bond measure, the sponsors must determine the amount of money required for the project, how it will be repaid and the time period for repayment. Many jurisdictions require a vote or a referendum on general obligation bonds during an election, making public support crucial to their passage because a certain percentage of the population is required to vote in support.