A New Path for Housing Agencies: The Bonnie Brae Model

Reimagining What’s Possible for Housing Agencies

Housing Agencies across the country face a familiar challenge — finding ways to expand and preserve affordable housing without taking on financial exposure or losing long-term ownership.

The Bonnie Brae development with the Denton Housing Authority (DHA) demonstrates a new model that does exactly that. By combining tax-exempt bond financing with a carefully structured public-private partnership, DHA is enabling the construction of 461 new units — including 230 affordable homes — while maintaining full ownership of the land and minimizing risk to the agency.

This structure, designed in collaboration with CSG Advisors, shows how housing agencies can use private capital to meet public goals — and do so on their own terms.

Keeping Control, Minimizing Risk

Under this model, DHA issues $141 million in tax-exempt bonds and retains ownership of the property. The private developer, JPI, constructs and operates the community.

Importantly, the bonds are secured solely by the project — not by DHA’s revenues or balance sheet. That means if anything goes wrong, the agency’s finances are protected.

This approach can help cities and housing authorities optimize several objectives:

1. The ability to leverage private capital at scale
2. The assurance that affordable housing is controlled as a public asset
3. The opportunity to shape long-term affordability outcomes

Creating Long-Term Affordability and Value

CSG helped DHA negotiate improvements that will pay off for decades:

• 30-year bond term (up from 10 years), guaranteeing at least three decades of affordability.
• Refinancing flexibility that allows DHA to capture future property value — potentially generating up to $14 million in proceeds down the line.
• Reduced financing costs by more than 25%, saving hundreds of thousands of dollars in fees.
• Performance-based asset management, aligning financial success with property outcomes.

By extending the term and optimizing repayment, DHA preserved long-term affordability while creating the option to build additional housing in the future.

Structuring That Works for Public Priorities

The financing was built to meet Denton’s priority to create affordable housing without undue compensation to private partners. The project was structured with a weighted average interest rate under 7%, competitive even in today’s market. It includes three layers of financing:

• Series A: 90% loan-to-cost, long-term fixed-rate tax-exempt debt
• Series B: Moderate-cost mezzanine financing
• Series C: Developer equity contribution

Together, they create a sustainable structure that protects the agency, aligns incentives, and ensures affordability without requiring additional subsidy.

Managing Risk with Private Partners

Housing agencies often hesitate to take on large-scale development because of construction and lease-up risks. Under this model:

• The developer (JPI) assumes responsibility for construction and stabilization, backed by guarantees.
• The interest rate is locked at closing, shielding DHA from market volatility.
• The 30-year term allows flexibility to refinance or exit based on market conditions, not deadlines.

This shifts operational risk away from the agency while preserving long-term control of the asset.

Why It Matters for Other Housing Agencies

The Bonnie Brae model offers a replicable path forward for public agencies seeking to:

• Expand housing supply without new federal capital grants
• Maintain ownership and affordability over time
• Access private investment without taking on financial exposure

It’s a structure that works in today’s constrained funding environment — one that can be scaled, repeated, and adapted for other communities with similar conditions.  This model is one example of how strategic financing can turn limitations into opportunity.

Partnering for Public Impact

The Bonnie Brae model shows how the right financial structure can expand what public agencies are able to do to generate affordable housing.

By using project-secured bonds instead of their own balance sheet, the Denton Housing Authority unlocked $141 million in financing to create 230 new affordable units — while keeping financial flexibility to take on future developments.