How Community-Focused Municipal Bond Investments Can Drive Social Impact
Pairing the words “community-focused” and “municipal bonds” together feels redundant, because at their core, the purpose of most municipal bonds is to invest in a local community. Whether through building roads and bridges, fire stations and school buildings, or community centers, municipal bonds frequently fund the bones of a community. Well-maintained and updated infrastructure can provide a solid backdrop for a community to flourish, but I didn’t fully appreciate the role that municipal infrastructure can fill, in bringing a community together until becoming a parent and exploring the full range of free and low-cost community spaces.
Many cities now have modern-day playgrounds complete with “ninja warrior” climbing structures, public pools with water slides, libraries with computers, free Wi-Fi, and child play areas. These updates help equalize play by providing a space for all children in a community to access amenities that otherwise would be available only to children whose families can afford to visit private facilities. Ultimately, municipal bonds provide a way for governments to afford these types of infrastructure projects.
In addition to providing community spaces, municipal bonds contribute to the development of structures that ensure all members of a municipality have their basic needs met, which can positively impact the individuals affected and their surrounding communities. One such example is the role of municipal bonds in funding affordable housing.
Why Underserved Communities Need Affordable Housing Assistance
Whether due to a shortage of available housing in high-demand areas or to the lack of developer interest in maintaining inexpensive housing, the United States is experiencing an affordable housing crisis. A 2017 study by the Joint Center for Housing Studies reported that the number of homes costing $2,000 or more in rent per month had increased by 97% over a 10-year period. In many locations, private markets cannot provide sufficient affordable housing without the help of a public subsidy because rent generated from low-income households oftentimes does not fully cover costs. To combat this, state and local governments work with the federal government to offer funds and tax credits to help provide access to affordable housing. One way that state and local housing finance agencies (HFAs) provide financing to housing projects is through issuing municipal bonds. (See Figure 1: How Affordable Housing Gets Built.)
HFAs typically loan funds generated from municipal housing bonds to:
1) Real estate developers to finance multi-family housing projects with units rented to moderate- and low-income families;
2) Finance single-family home mortgages targeted at first-time homebuyers who meet income and purchase price requirements.
Municipal bonds allow developers to finance projects at lower interest rates and facilitate eligibility for the federal government’s low-income housing tax credit program, which helps developers offset the cost of developing and rehabilitating affordable rental housing.
The Positive Impact of Affordable Housing on Moderate- and Low-Income Residents
For moderate- and low-income families, the availability of affordable housing can positively affect their health, education, and economic opportunities.
• Reducing Negative Health Outcomes
Adults who can spend less on housing are more likely to fill prescriptions and adhere to health care treatments than those who are cost burdened. Additionally, children in low-income families who receive housing subsidies are more likely to meet “well child” criteria, which measures development, weight, and health. Well-constructed and maintained housing also limits exposure to environmental toxins and allergens.
• Increasing Educational Achievement
Access to affordable housing can reduce frequent moves, which can have a negative impact on children’s educational achievement. Stable housing helps avoid school absences, changing schools, and loss of friendships and community ties, all of which can lead to declines in educational achievement.
• Enhancing Economic Opportunity
Housing stability can also help residents avoid job loss and increase their economic security. Researchers estimate that involuntary housing loss through eviction increased the risk of job loss by 11% to 22%. Spending less on housing costs allows moderate- to low-income residents to increase economic security through providing a greater ability to save for retirement, pay for higher education, or use discretionary income to build up an emergency fund.
Positive Impact on Communities
Affordable housing can also have a positive influence on a surrounding community through neighborhood improvement and economic impacts.
For instance, affordable housing projects can improve the communities where they’re built by reducing blight and fostering greater stability. Stable housing also allows communities to retain and attract qualified workers. Additionally, affordable housing may increase a community’s property values, especially if it replaces a decaying property.
Gurtin Investment in Housing Bonds
Gurtin seeks to support social impact by investing in municipal bonds that fund essential government projects — such as those helping to improve access to affordable housing — in low- to moderate-income or high-poverty areas. In addition to affordable housing projects, Gurtin also seeks to support social impact in communities by investing in municipal bonds that help finance projects related to parks and recreation facilities, libraries, public transit, bridges, and other essential infrastructure that benefits underserved communities throughout the United States.
Through municipal bond investing, we aim to help improve the communities’ social and economic fabric by making it more inclusive, safe, resilient, and sustainable.
Article by Emily E. Robare, head of ESG (environmental, social, and governance) research on the municipal credit research team at Gurtin Municipal Bond Management, a PIMCO company. As head of ESG research, Ms. Robare leads the firm’s sustainability and ESG research efforts, including integration of ESG risk factors into credit analysis for all bond holdings and conducting in-depth research on ESG topics, such as climate change and public pensions. Ms. Robare co-led the development of Gurtin’s Municipal Social Advancement strategy, allowing investors to target sustainable municipal bond investing in impactful projects in local communities across the United States. In addition, Ms. Robare sits on the Investment Committee and continues to conduct day-to-day credit analysis on municipal bonds across a variety of states and municipal sectors.
Outside of her role at the firm, Ms. Robare is on the Board of the Minnesota Chapter of Women in Public Finance.
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 Out of Reach 2018: The High Cost of Housing, National Low Income Housing Coalition, 2018.
 Housing Revenue Bond, Municipal Securities Rulemaking Board, n.d.
 Mark Keightley, An Introduction to the Low-Income Housing Tax Credit, Congressional Research Service, March 2018.
 Nabihah Maqbool, Janet Viveiros, and Mindy Ault, The Impacts of Affordable Housing on Health: A Research Summary, Insights from Housing Policy Research, Center for Housing Policy, April 2015.
Maya Brennan, Patrick Reed, and Lisa A. Sturtevant, The Impacts of Affordable Housing on Education: A Research Summary, Insights from Housing Policy Research, Center for Housing Policy, November 2014.
 The Gap: A Shortage of Affordable Homes (2018), National Low Income Housing Coalition, March 2018.
 Measuring the Economic Impact of Affordable Housing in Rhode Island, HousingWorks RI, 2010.