To amend the Internal Revenue Code of 1986 to provide additional restrictions on tax-exempt bonds used to provide residential rental property for family units.

Amends Internal Revenue Code provisions relating to bonds used by tax-exempt organizations (501(c)(3) bonds). Describes the treatment of property originally financed with taxable debt and later refinanced with tax-exempt debt.

Requires residential rental projects financed with 501(c)(3) bonds to meet specified low-income criteria.

Treats as arbitrage bonds certain bonds whose proceeds are used for higher yielding investments in residential rental property for family units within the issuer's jurisdiction.