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.

Have you looked at new low income rent-to-own options?

 

 

Affordable Housing Problems? Contractors.

affordable houing problems

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.”

 

Best Way to Build Your Credit Rating
In today’s world, credit can be easily destroyed. If you are young and entering the adult world, you may not always understand how to maintain a great credit rating. Often, you do not qualify for a loan or credit card due to having no credit. Lapses in employment or...
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...
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 Facebook wall and delete those...
Is Public Housing An Option for You?
The US Department of Housing and Urban Development (HUD) utilizes several programs to ensure housing for lower-income families. One of these programs is Public Housing. This program was designed to provide decent and safe rental homes for lower-income...
Section 8 Vouchers Less Likely to be Accepted
 About 300 less, that is the number in Nashville, TN. Since 2010 there has been 300 fewer Section 8 vouchers accepted throughout the Greater Nashville Area. Families are being kicked out of their apartments and housing because the owners have just decided...
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...
Job Hunting at Career Fairs
Are you looking to find a new job or a new career? If you are, you may want to try career day job hunting, as it is a great way to not only find available jobs, but also apply and interview the same day. Looking for new and exciting careers? Click the link below!...
The FHA and Home Loans
 The Federal Housing Administration (FHA) insures mortgages on loans provided through FHA-approved lenders. Since its creation in 1934, the FHA has insured tens of millions of homes for families in the United States. These mortgage insurances protect...
“Believe in The Power of 3”
The number 3 is the first number to which the meaning “All” was given. It is the number of the whole as it contains the beginning, a middle, and an end. When you raise the number 3 to a second power, it simply magnifies everything you already have and...
Social Security Benefits & Retirement
Though all Americans look forward to the day when they can kick back in a lawn chair and spend time working in their flower gardens, retirement comes with many burdens. A fixed income or access to a 401(k) may not be enough to supplement the lifestyle many seniors are...
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...
Modern Millionaires Mindset
Here’s A Modern Millionaire Rhetorical Question:   If you have a spare million dollars in your bank account today… How will you spend it? Pay off all your bills and loans? Buy your dream car? Dream house? Give your family a better life? Travel all...
Are Discount Stores Really A Bargain?
It seems like dollar stores and other various discount stores are becoming a common retailer in most areas. Can these discount stores really offer you a bargain or do they just sell poor quality items? In my opinion, there are plenty of great bargains to be found in...
Applying and Making Phone Calls to Potential Employers
Applying and Making Phone Calls to Potential Employers Applying to Places Not Hiring: A Wise Move or Not? Are you in desperate need of a job? If you are currently unemployed or if you truly think that your current job is making you “crazy,” you may be due for a new...
4 Challenging Discussions (And How To Have Them)
It's not always easy to practice open and honest communication, especially with your family. Unfortunately, that lack of communication can have serious consequences. If you're having a hard time finding the courage to approach your family about an issue...
Disability Lawyers | Filing SSA Claims
According to the Social Security Administration, an average of 52% of applicants is rejected yearly. This only shows that the government is very serious in paying only those who deserve these benefits. So, it is important that social security disability...
A VA Home Loan Can Help You Get Affordable Housing
 Ever since the housing market collapse, lenders have tightened the requirements to qualify for loans. If you don't have the required credit score or enough for a 20 percent down payment, it will be difficult to secure qualification for a conventional...
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)...
Social Security Disability Assistance
 Social Security Disability Insurance pays benefits to you and certain members of your family if worked long enough and paid Social Security taxes. Supplemental Security Income pays benefits based on financial need. If you need help and personal guidance...
Natural Healing Options for Arthritis
Arthritis comes in various forms, but it's always painful. The typical medical approach is to take some sort of pain medication (usually non-steroidal anti-inflammatory drugs, or NASDs) that might result in various side effects, such as stomach pain. Thankfully, there...

Subscribe

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

You Are On Your Way!

Family Picnic

Enter Your Email to Receive New Assistance Updates

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

Thank You! You will now receive the latest assistance updates!

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

Share This