Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 1

Which type of financing is aimed at rewarding investment in low-income housing?

1. Standard mortgage financing

2. Tax-Free Bond Financing

3. Short-term construction loans

4. Retail financing options

The correct answer is: Tax-Free Bond Financing

The correct answer focuses on tax-free bond financing, which is specifically designed to encourage investment in low-income housing. This type of financing provides tax benefits to investors, which can significantly enhance the attractiveness of projects that may otherwise be seen as less profitable. Tax-free bonds offer lower interest rates since the interest earned by bondholders is exempt from federal income tax, and often state and local taxes as well. This incentivizes capital to flow into projects aimed at providing affordable housing options for low-income individuals and families. By lowering financing costs, these bonds facilitate the construction and rehabilitation of affordable units, thus supporting the development of communities in need. The other options do not specifically address the aim of enhancing investment in low-income housing. Standard mortgage financing pertains to conventional loans typically used for various types of properties without specific regard for income levels. Short-term construction loans are primarily focused on the immediate funding needs of construction projects and do not inherently offer incentives for low-income housing development. Retail financing options are generally related to consumer financing for purchases in retail settings, which is unrelated to housing investment initiatives.