Subscribe

Affordable Housing Problems

by | Housing Information

On 1st Street in Santa Ana — not far from where authorities recently cleared a tent encampment along the Santa Ana River near Angel Stadium — developer Caleb Roope wants to build nearly 1,000 apartments that will be affordable for low-income seniors and families. But, despite a renewed push from the state to tackle its affordable housing crisis, Roope, chief executive of Pacific Cos., isn’t sure he can break ground on the two subsidized projects.

 

The problem? Contractors.

The $1.5-trillion tax cut President Trump signed into law last year slashed corporate tax rates and gave businesses more money to spend how they choose. Which is a great thing for employees, job rate, and wages, but it can hurt affordable housing builders because they are not getting special credits to build low income housing.

It indirectly cut the value of a crucial tax credit developers rely on to offer homes at rents that lower-income Americans can afford. As a result, developers such as Roope are receiving less money when they sell those credits, opening up gaping budget holes that are delaying, even killing, their projects.

“We had one fall through in Albuquerque, N.M. It was 216 units,” Roope said. “We also had another 184-unit project in Phoenix that suffered a similar fate.”

Roope hasn’t yet lost a project in California. But in a state where land and construction costs are already high, the reduced value of the federal Low Income Housing Tax Credit is a blow.

Nearly 135,000 people are estimated to be homeless in California. Many of them lay their heads at night inside tents on the streets of San Francisco, Los Angeles and San Diego.

Even many of those who do have a home struggle. In 2016, 29% of renters, or 1.7 million households, spent more than half their gross income on housing costs, according to the latest analysis from Harvard University’s Joint Center for Housing Studies.

That percentage is the highest in the country — largely the result, economists say, of decades in which developers built too few market-rate homes relative to job and population growth.

Affordable housing advocates also point to the 2011 elimination of California’s redevelopment agencies — which contributed $1 billion annually to subsidized projects — as a major contributor to homelessness and the larger affordability crisis.

The state has taken some steps recently to make housing more affordable. Last year lawmakers eased some development restrictions and moved to fund more subsidized units through fees and an upcoming $4-billion bond measure on November’s ballot.

In the last two years, Los Angeles County and city voters also agreed to raise their taxes to provide services and build homes for those now on the streets.

But subsidized projects usually need a variety of government funding sources. The federal tax credit is one crucial piece.

Developers dodged a bullet when the final version of the bill left intact a special bond required for many tax credit projects that had been proposed for elimination. But the new law still made the credits less valuable.

Here’s how it works: Government agencies award the credits to developers, which then sell them to big banks and other investors along with an equity share in their projects. The investors pay not only for the direct credit but also for the right to deduct depreciation and certain expenses as owners.

But with a lower federal tax rate, those owners now don’t benefit as much from the write-offs and thus they aren’t willing to pay developers as much in order to keep rents low.

A reduction in credit value is a big hit because nearly all below-market rental properties use the program, which pays for about 20% to 70% of development costs, said Peter Lawrence, a director at Novogradac & Co., a national accounting and consulting firm.

To make up the difference, developers must scale back their projects, find savings elsewhere or ask for more funds from other government sources, likely reducing the number of units the new local investments can create.

In all, Novogradac estimates 235,000 fewer affordable homes will be built nationwide over the next 10 years because of the new tax law. Matt Schwartz of the California Housing Partnership pegged the loss for California at as many as 75,000 units.

“There is no way you are going to get any serious dent in the affordable rental housing challenges in the state without the low-income housing tax credit,” Lawrence said.

 

Santa Anna Planned Housing Development

Santa Anna Planned Housing Development

 

For many affordable housing developers, budget shortfalls started right after the 2016 election.

That’s when investors started paying less. They assumed soon-to-be-President Trump would sign into law corporate tax cuts approved by a Republican Congress.

Mark Stivers, executive director of the California Tax Credit Allocation Committee, said the average price for a tax credit in 2017 dropped 11% from a year earlier.

Compared with 2016, nearly 11,000 fewer low-income units were financed through the federal credit last year, according to a California Housing Partnership analysis of state data.

Experts such as Stivers predict values will drop again this year, because for much of 2017 investors expected a 25% corporate tax rate, rather than the 21% level that became law.

“California and L.A. have come together to say we want to do something about this,” said Alan Greenlee, executive director of the Southern California Assn. of Non-Profit Housing. “Just as that happens, the federal government comes and pulls the rug out from under us.”

The tax credit program has typically enjoyed bipartisan support. And two senators, Maria Cantwell (D-Wash.) and Orrin G. Hatch (R-Utah), introduced a bill last March that would expand the federal program, with the hope of boosting housing production beyond any deficit created from tax cuts.

Cantwell, in an interview, acknowledged it’s been an “uphill battle” to get the bill passed so far. In part that’s because it’s a challenge to convince more of her colleagues that housing affordability is a national crisis “we can do something about.”

“We have to step up,” she said.

Cantwell’s office said she and Hatch were working to attach the expansion to any bill moving through the Senate.

Lawrence, of the affordable housing consulting group, said it is “quite possible” that such a bill would be a government-funding bill Congress must pass before March 23 to avoid another shutdown.

In the meantime, Roope of Pacific Cos. and his development partner AMG and Associates are trying to figure out where they can find the funds to fill a $15-million budget gap for their senior and family developments along 1st Street.

“There are no guarantees we can move forward,” Roope said. “We are working our tail off to try and make sure these projects are feasible, and we are going to need all the help we can get.”

 

Home Improvement Grants
 Is your home desperate for repairs? Are you at your financial limits, broke...flat broke? Have you ever wondered how it would feel to have the government help you be able to afford these critical repairs? Help is possible through new home improvement...
How A Home Warranty Will Save You Money
A Home Warranty Will Save You Money Owning a home can be expensive. Appliances break down, and air conditioners tend to quit working in the middle of the summer. In fact, most home have a major mechanical breakdown twice each year. Usually, these breakdowns occur at...
How Do I Get FHA Refunds?
Although FHA refunds are for people who have FHA-insured mortgage loans, not everyone is entitled to a refund. Various factors are considered to determine who can receive a refund. FHA refunds are available for those who finance their homes within three...
How Do You Repair Your Credit Score?
How Do You Repair Your Credit Score? You may be bombarded with ads for businesses telling you they can help fix your credit. Many companies say they have some kind of proven method for improving your credit score. However, you should first follow this advice and see...
Searching for Online and Freelance Employment
Searching for Online & Freelance Employment Many career fields and skills do not fall under traditional frameworks for employment. Writers, photographers, marketers, teachers and artists may be able to find work as online freelancers to continue improving their...
Best Credit Cards for Questionable Credit
Life does not always work out as planned. Sometimes, a gap in employment leads to a few missed payments, and eviction, or a repossessed vehicle. These things happen to most people. In order build credit back up, a credit card may help. Making regular...
Solid Advice for Credit Repair
It may be difficult to find information on the best ways to improve your credit. There is a wealth of different tips in this article to help you rebuild your journey to credit repair. Using these tips can save you from stressing and prevent headaches....
How to Find Bargains at Flea Markets
I love to spend hours looking at flea markets for different items. Different vendors set up their products in a central location so that consumers can spend their time walking around and see the new and used items available for sale. You never know what you will come...
Run A Background Check When Applying for Jobs!
Run A Background Check When Applying for Jobs! Social media is everywhere in the air around us today. Hence it is natural for you to assume you can handpick and choose what you want your employees to see. Most people therefore imagine that once they clean up their...
How Does Renting to Own Really Work?
 In the years leading up to the financial crisis of 2007-08, the renting to own model — in which tenants/buyers have an option to purchase the house or condo they’re renting from their landlord/seller— was mostly offered by individual homeowners. In the...
The AHCA Impact on Medicare & Medicaid
The Impact on Medicare & Medicaid The repeal and replace legislation concerning the Affordable Care Act (ACA), or Obamacare, seems complicated for many consumers. Though it will likely see changes as it is debated in the Senate, the American Healthcare Act (AHCA)...
Best and Worst Student Loan Services
Best and Worst Student Loan Services This is the time of year when hundreds of thousands of Americans begin to prepare for their first semester in college. They begin to seek out the items that will sustain them during dorm life. Parents spend money on new sheets, hot...
Step By Step Guide To Debt Repair & Rebuilding Credit
Step By Step Guide To Debt Repair & Rebuilding Credit A severe debt situation is a huge financial misfortune that can ruin your ideal credit scores. If you are bothered by this excruciating condition, never worry. You are not alone in this regard. During the periods...
Government Assistance for Unemployment
Government Assistance for Unemployment Sometimes, life does not go as smoothly as planned. Fluctuations in the economy lead to periodic lay-offs. Sometimes, a company fails and workers find themselves out of work. Often, an employee and employer simply part ways after...
Car Shopping and Ways To Pay for It
A franchised new car dealership is a reliable, if not the only, source for anyone who wants to buy a new car.  But to those who prefer buying used or previously owned cars, there are plenty of options and sources one could choose from to be able to make...
Is Your Health Preventing You from Working?
Is Your Health Preventing You from Working? There are several advantages to applying for Social Security Benefits online. There is no need for an appointment and it will definitely save you time. Visitng your local Social Security Office can be very time consuming and...
Low Income Families and Educational Help
Low Income Families and Educational Help It is a common perception that only the most gifted students are eligible for grants and scholarships to get them through the final phases of their education, and this then gives rise to the popular thought that those residing...
Lifeline Assistance Program – Obama Phone
Lifeline Assistance Program - Obama Phone There is now a program out there that can even help with your cell phone. The special government program called Lifeline Assistance that offers a free phone and minutes to those who qualify. Getting on the list is not very...
Government Grants Exposed
You and I have heard it all before, the man with the funny jacket on late night TV telling us that the United States government gives out over 30 Billion dollars in grants every year. And if we want any of that for ourselves, all we have to do is send him...
Five Great Resources for Working from Home
Five Great Resources for Working from Home There have been thousands of people watching “Good Morning America” who have sent us messages thanking use for helping them to make the money while working at home. For anyone who hasn’t yet taken the leap forward but feel as...

Family Picnic

Enter Your Email for Best Results

Due to the overwhelming response, please enter your name and email to ensure the proper search results.

You Are On Your Way!

Family Picnic

Enter Your Email for Best Results

Due to the overwhelming response, enter your email for best results. Look for your free ebook from New Flex Career about finding unclaimed money!

You Are On Your Way!

Family Picnic

Enter Your Email for Best Results

Due to the overwhelming response, please enter your name and email to ensure the proper search results.

You Are On Your Way!

Pin It on Pinterest

The More You Share. The More We Can Help!

Share these posts & pages with friends!