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.”

 

The Most Common Reasons for Debt
 High debt balances can create significant stress, negatively impact not only your future, but it can also impact your health. It can prevent you from enjoying the quality of life that you otherwise may enjoy without the burden of debt payments. While...
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...
You Can Save Money on Your Monthly Bills By Reading These Tips
When you add up the total cost of your monthly utility bills, you may be astounded by how expensive utilities can be. This may be particularly true during peak usage months in the height of summer and in the dead of winter. You and your family...
Social Security Disability Benefits
Sometimes in life, events occur that prevent people from working in order to make a living. Accidents occur and illness strikes at the most inopportune moments. The Social Security Administration may be able to help. They provide disability benefits to...
Teach Safety First
There is no denying the fact that the dangers out there are very real and your child is susceptible to them all. Luckily you can implement so many strategies that help protect your little ones and keep them safe at any age as long as you are willing to...
The World of Federal Grants
Welcome To The Wonderful World Of Federal Grants Federal Grants - If you are planning to go to college or university but know that you would never be able to afford it on your own, or with the help of your family for that matter, one of the first places...
Feeling Lost? Free (Or Cheap) Career Assessment Tools
In today's world, more people are struggling to pay/find for housing, medical bills, education, and other aspects of life. As a result, embarking on a new career is becoming a popular option to better themselves and their families. However, when choosing a new career,...
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...
5 Ways to Keep Your House During A Market Crash
Anyone paying attention to the housing market in the Los Angeles area knows that home prices have been at record highs. National Mortgage News suggests that this could be a housing bubble about to burst, and a decline in home prices and an increase in mortgage...
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!...
Receiving $4000 in Home Rebates
 Are there any home improvements that you have been contemplating lately? Are you struggling to make ends meet already? Learn more about three Programs a that could help you and millions of homeowners qualify for a $4,000 rebate. These Are Very Tough...
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...
How To Get The Best Insurance Deals
In most cases finding the best insurance deals is difficult. Since having insurance is a requirement rather than being optional it is a good idea to shop around for the best insurance deals. It’s difficult to shell out the cash for insurance premiums and...
Best Advice for Seeking Employment
Your career and life depend on you taking the time to learn all that you can about earning gainful employment. You cannot get a job without finding the right approach that will open up opportunities. Keep reading if you wish to learn more. Speak with...
Save Money When Grocery Shopping
 It is a good idea to be aware of the amount of money that we spend on items when we go grocery shopping on a regular basis. When times are tough, it is this knowledge that can help us to survive on less income than usual, which can help in a big way if we...
Unpaid Wages Recovery Guide
If you worked for it, then you should get all upaid wages. Everyday can be a struggle and still come up on the short end of the stick. That is why you may be frustrated when you are not paid the money you are owed. Fortunately, there are many steps that you can take...
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...
Which Student Loan Repayment Options Work for You?
Which Student Loan Repayment Options Work for You? The student loan process can be tricky and difficult to understand. Students often overlook the process from the beginning of college until graduation, never realizing the impact of the loans until payment become due...
4 Most Challenging Discussions You Can Have With Family (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 you're...
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...

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 Name and Email for Best Results

Due to the overwhelming response, enter your email for best results. Look for your free ebooks from New Flex Career!

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 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!

Pin It on Pinterest

The More You Share. The More We Can Help!

Share these posts & pages with friends!