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Combatting the Affordable Housing Crisis; Quarterly Update from the California Tax Credit Allocation Committee

From: Mueller, Raymond <"Mueller,>
Date: Fri, 26 Jan 2018 01:49:50 +0000

Dear Colleagues, Menlo Park Housing Commissioners, and Menlo Park Housing Professional Staff,

I just wanted to share a quarterly update of work that has been performed at the State of California Tax Credit Allocation Committee, in it's efforts to address the state's affordable housing crisis, since my appointment to the Committee last year.

In September the Tax Credit Allocation Committee (TCAC) awarded competitive Low-Income Housing Tax Credits for the new construction or rehabilitation of 36 affordable rental housing developments throughout California (seehttp://www.treasurer.ca.gov/ctcac/2017/secondround/recommendations/index.asp). In sum, TCAC awarded almost $470 million in federal tax credits and $55 million in state credits in this round alone. These resources will support 1603 new and 408 rehabilitated rental homes for lower-income Californians.

TCAC also awards non-competitive federal tax credits. Over the course of 2017, TCAC funded the new construction or rehabilitation of just over 10,000 units with these resources, the majority of which were rehabilitated units. While this level of production is a significant drop from the 2016 all-time record of 20,000 units, it is also close to the 10-year average. The main factor affecting production was the uncertainty created by discussion of the federal tax cut legislation. Immediately after the 2016 election, tax credit pricing dropped 10-15 cents just on the increased possibility that the corporate tax rate might fall. This made many projects infeasible. With the enactment of the federal tax cut bill with its 21% corporate tax rate, this depressed pricing will now be the norm. (See Tax Overhaul Is a Blow to Affordable Housing Efforts<https://www.nytimes.com/2018/01/18/business/economy/tax-housing.html>). In addition to the impacts of the tax cut, rising interest rates and soaring construction c
osts also contributed to project infeasibility.

In December, TCAC adopted regulation changes that incentivize the location of new construction projects for families in areas of "high opportunity," as mapped by an academic task force headed by the Haas Institute at UC Berkeley. Between 2003 and 2015, 43% of all family units receiving competitive tax credits were located in census tracts with high segregation and poverty, which represent only 13% of all census tracts. Conversely, only 14% of such units were located in high or highest resources areas, which represent 40% of all census tracts. In other words, a resident of a TCAC family project is three times more likely to reside in a poor, segregated neighborhood than in a neighborhood with good schools, jobs, and environmental condition. The new regulations provide point and tiebreaker incentives to locate new family projects in higher resource areas in order to achieve greater parity. Ultimately, TCAC's goal is twofold: to increase housing choice for low-income families and to increase access to oppo
rtunity for our residents. Numerous studies have shown that access to opportunity, especially for children, has a significant benefit for many measure of life outcomes.

I hope this update contains useful information. Please don't hesitate to contact me if you have any questions.?

With best regards,
Ray

(Please excuse odd punctuation. My mac doesn't always work well with the City's email system.)
Received on Thu Jan 25 2018 - 17:54:05 PST

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