Bond Cap Projection 2023 — Michigan State Housing Development Authority

Summary

A fact sheet titled Bond Cap Projection 2023 from the Michigan State Housing Development Authority (MSHDA) on the authority's limit on outstanding bonds and notes. It states that MSHDA cannot have bonds or notes outstanding above an aggregate principal amount of $5 billion and estimates it will reach the cap within three months, that the bond limit has not been raised since 2019, and that bond cap usage has increased more than 100 percent since then. The sheet describes MSHDA bonds as asset-backed debt used to purchase single-family and multifamily mortgages, and states that the proposed legislation would amend Public Act 346 of 1966 to raise the limit from $5 billion to $10 billion. A chart shows MSHDA outstanding debt against the limit.

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BOND CAP PROJECTION 2023

®

Currently, MSHDA cannot have outstanding bonds or
notes at any time, for any of its corporate purposes, in
an aggregate principal amount exceeding $5. billion.
MSHDA estimates it will push up against this cuent cap
within three months.

* The Michigan State Housing Development Authority
(MSHDA] can issue debt for very limited purposes. To date,
MSHDA has only issued debt for the purchase of single-
family morigages, funding multitamily development, home
improvement loans and the cost of issuing the bonds.

* MSHDA bonds are asset-backed debt, meaning the assets
purchased with the bond proceeds serve as security to the
bond investors. As the morigages are repaid, the funds are
used to pay back the bonds. The Authority does not issue
debt to fund operating costs.

« MSHDA primarily uses the proceeds from the issuance
of debt to purchase assets (multifamily and single-family
mortgages), that are pledged to investors. Revenues
generated from these debt issuances allow MSHDA to
operate with no General Funds from the State, and debt
issued by MSHDA is not a General Obligation of the State
of Michigan.

* MSHDA has never failed to meet its obligations, has never
defaulted — even through the housing-induced credit crisis
of 2008 and COVID-19. MSHDA's Issuer Credit Rating is
rated AA with a Stable Outlook by Standard & Poor's,

fel 5... STATE HOUSING DEVELOPMENT AUTHORITY

MSHDA's bond limit has not been raised since 2019.
Bond cap usage has increased more than 100 percent
since then. If the current pace of production continues,
MSHDA will be back to the legislature in three to four
years for another bond cap increase.

Inflation has increased the value of homes and the cost of
building materials, which in addition to the robust lending,
is accelerating the speed with which MSHDA is reaching
the cap.

* We need to build 190K units to align with housing

production shortfalls since the Great Recession
Cost of this effort will be $154 Billion.

Census data on sheller overburden shows o worsening of
conditions between 2019 and 202 1; about 46% of renters
pay more than a third of their incomes on shelter. This is
up from 44% in 2019 and encompasses over 500,000
households.

The situation among homeowners has worsened since
2019; the number of overburdened owners increased
by about 10% during those two years. About 570,000
homeowners were overburdened in 2021, and they
account for about one in every five owner households.

The proposed legislation would amend MSHDA's governing
statute (Public Act 346 of 1966] to increase MSHDA's limit
on corporate bonds and noes from the current $5 billion
limit to $10 billion.

MSHDA Outstanding Debt

6,000,000,000

5,000,000,000

4,000,060,000

2,000,000,000

Dec 22
Nov 23
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Sep-23
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Mar-24
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Limit


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2023-09-12_testimony_hecon-2023-director-amy-hovey_39303.pdf

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