More than 180 institutional and individual investors have committed $350 million to a new fund launched through a joint venture between NewPoint Real Estate Capital and Morgan Properties, a signal of robust demand for affordable housing finance. The fund targets tax-exempt municipal bonds that underpin a distinctive approach to funding affordable housing projects nationwide.
Rob Wrzosek, president of affordable strategies at NewPoint, explained to GlobeSt.com that while municipal bonds have been used for affordable housing finance since at least the 1950s, the innovation lies in combining construction financing and government-sponsored enterprise guarantees into a single process.
NewPoint functions not only as the bond buyer but also as the construction and GSE mortgage lender, integrating these traditionally separate roles into one structure. This model allows for securitization reminiscent of commercial mortgage-backed securities, with the bonds providing capital upfront for construction and permanent financing once properties reach occupancy targets.
The fund’s municipal bonds have 18-year terms and carry interest rates currently in the low 5% range. Wrzosek noted that using GSE lenders such as Fannie Mae or Freddie Mac significantly lowers interest rates compared with typical loans—down from about 6.5% without GSE involvement to roughly 5.25% with it—resulting in lower mortgage payments and enabling projects to offer more affordable rents. Local governments repay the bond coupons and principal from the properties’ operating income over time.
After years of dormancy following the financial crisis due to comparatively cheap traditional financing, this integrated municipal bond approach is regaining traction amid rising interest rates and diminishing availability of other capital. Wrzosek noted that while others, such as PIMCO, offer similar structures, NewPoint is unique in combining bond buying, GSE lending and construction financing under one entity.
“This is how you finance affordable housing in America,” Wrzosek said.
“If you know how the pieces go together, you can offer investors an attractive risk profile and owners unique financing products,” demonstrating the fund’s potential to help address the nation’s pressing affordable housing shortage through innovative capital solutions.
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