Virginia’s HB 806: Unlocking Industrial Development Authorities as Conduit Issuers for Affordable Housing Bonds

A new Virginia law could make it easier to finance affordable housing by allowing local industrial and economic development authorities (“EDAs”) to issue bonds for housing projects even in cities and counties that already have housing authorities. Governor Spanberger signed House Bill 806 into law on April 6, 2026. The measure amends Virginia Code §§ 15.2-4901 and 15.2-4902 and expands the number of public entities that can serve as conduit issuers for single-family and multifamily affordable housing developments across the Commonwealth.

How Virginia Affordable Housing Bond Financing Worked Before HB 806

Virginia’s Industrial Development and Revenue Bond Act, codified at Title 15.2, Chapter 49 of the Virginia Code, has authorized EDAs to finance a broad range of economic development projects since 1966. Over the decades, their functions expanded well beyond their original industrial mandate. However, the Act drew a firm line on housing: EDAs could finance residential rental projects only in localities where a housing authority had not been activated under the Virginia Housing Authorities Law.

Many of Virginia’s larger cities and urban counties activated housing authorities in the 1940s and 1950s. The result was a paradox: the localities with the greatest need for affordable housing finance were frequently the very jurisdictions in which EDAs were prohibited from acting as conduit issuers for housing bonds. Developers seeking to use an EDA as a conduit issuer for tax-exempt qualified residential rental project bonds under I.R.C. § 142(d) had to look to Virginia Housing or the local housing authority.

This limitation had practical consequences. Housing authorities, while possessing broad statutory powers (including eminent domain and the ability to operate public housing), do not always have the institutional infrastructure or appetite to serve as frequent conduit issuers for modern, privately developed Low-Income Housing Tax Credit (LIHTC) transactions. In some localities, the housing authority was dormant or thinly staffed and often had political or operational issues surrounding public housing, yet its mere activation was sufficient to bar the local EDA, which might be better equipped and more experienced in bond issuance for private activity bonds, from participating in housing finance. The restriction created an unnecessary bottleneck in the Commonwealth’s affordable housing pipeline.

What Virginia HB 806 Changes for Affordable Housing Bonds

HB 806 eliminates this bottleneck in two respects.

First, it strikes the prior restriction and allows IDAs to exercise their powers with respect to facilities used primarily for single-family or multi-family residences in order to promote safe and affordable housing, regardless of whether a housing authority has been activated in the locality. This means that an EDA in places such as Richmond, Norfolk, Petersburg, Fairfax County, or any other jurisdiction with a long-established housing authority may now serve as a conduit issuer for affordable housing bonds on the same terms as it would for any other economic development project. It also means that EDAs are better equipped to finance mixed-use projects that include housing along with other types of authorized EDA projects.

Second, HB 806 grants IDAs an explicit statutory power to issue bonds associated with the construction of affordable housing. While EDAs already possessed general bond-issuing authority under the Industrial Development and Revenue Bond Act, the express inclusion of affordable housing bond authority removes any lingering question about the scope of EDA powers in this context.

What Restrictions Still Apply to Industrial Development Authorities

HB 806 does not transform IDAs into housing authorities. Two important limitations remain in place. IDAs may not exercise the power of eminent domain for housing purposes under Va. Code § 15.2-4901, and they may not operate public housing under Va. Code § 15.2-4905. These carve-outs preserve the distinction between IDAs, which function as financing vehicles and economic development facilitators, and housing authorities, which retain their broader operational and regulatory mandates under the Virginia Housing Authorities Law. In short, IDAs may finance housing; they may not operate housing facilities.

It is also worth noting that HB 806 does not alter Virginia Housing’s statutory functions or the Department of Housing and Community Development’s gatekeeper role in volume cap allocation. Rather, it expands the universe of potential conduit issuers that may work alongside Virginia Housing in executing bond-financed transactions.

Practical Implications for the Virginia Bond Market

A Wider Pool of Conduit Issuers

The most immediate effect of HB 806 is to expand the pool of entities available to issue conduit bonds for affordable housing projects across the Commonwealth. EDAs are present in nearly every Virginia locality and are typically governed by seven-member boards appointed by the local governing body. Many have established track records in conduit bond issuance for commercial and industrial projects and possess the administrative capacity, legal counsel relationships, and familiarity with bond processes that housing authorities in certain jurisdictions may lack. Developers and bond counsel will now have greater flexibility to select the conduit issuer best suited to a given transaction, whether that is the local EDA, a housing authority, or Virginia Housing.

How HB 806 Works Alongside Virginia HB 854

HB 806 also interacts with another 2026 enactment, HB 854, which creates a local-option real property tax exemption for affordable housing projects where the managing member of a limited liability company is a nonprofit entity. Critically, HB 854 provides that income used solely to make debt service on affordable housing bonds is not treated as disqualifying income for the purposes of determining charitable and benevolent use. This means that nonprofit-managed LIHTC properties carrying bond debt may now qualify for local tax exemptions. For bond counsel, this creates a more favorable underwriting environment and a stronger revenue base supporting bond repayment, particularly where the conduit issuer is a local EDA acting under its newly expanded HB 806 powers.

Looking Ahead

HB 806 is in effect as of July 1, 2026. It represents a thoughtful, targeted reform that aligns Virginia’s statutory framework with the realities of modern affordable housing finance, in which EDAs are often the most nimble and experienced conduit issuers at the local level. Combined with the expansion of local property tax relief under HB 854, and the broader suite of 2026 housing legislation, HB 806 positions Virginia as a state that is actively removing barriers to affordable housing production.

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