BILL ANALYSIS                                                                                                                                                                                                    






          
                SENATE HOUSING & COMMUNITY DEVELOPMENT COMMITTEE
                         Senator Joseph L. Dunn, Chair


          Bill No:                             SB 73  Hearing:April  
          2, 2001
          Author:                              Dunn Fiscal:Yes
          Version:                              January 10,  
          2001Consultant:Mark Stivers

            INCREASE IN THE STATE LOW-INCOME HOUSING TAX CREDIT CAP

           Background and Existing Law  :

          The federal Tax Reform Act of 1986 created the Low-Income  
          Housing Tax Credit Program to stimulate private investment  
          in the production and rehabilitation of affordable rental  
          housing.  The federal tax credits were initially capped for  
          each state at $1.25 per capita per year.  As part of last  
          year's omnibus budget bill, Congress increased the cap on  
          federal credits per state to $1.50 per resident for 2001  
          and $1.75 per capita for 2002.  In following years the cap  
          will increase further by a percentage equal to the rise in  
          the federal Consumer Price Index.  

          Because high housing costs make it particularly difficult  
          to produce affordable housing in California, the  
          Legislature created a state low income housing tax credit  
          program in 1987 to supplement federal tax credits.  The  
          state tax credit is only available to projects that receive  
          federal tax credits and are intended to stretch the federal  
          credits over more projects.  The state tax credits are  
          currently limited to $50 million per year. 

          The California Tax Credit Allocation Committee (TCAC)  
          administers both the state and federal low income housing  
          tax credit programs.  Based on a competitive application  
          process, TCAC allocates the tax credits to housing  
          developers who effectively sell the credits to investors to  
          raise capital for the construction of affordable housing  
          units.  Investors typically pay 80 cents for each dollar of  
          tax credit.  The program is currently oversubscribed by a  
          ratio of at least three to one.  Moreover, TCAC ran out of  
          state credits last year before credits could be awarded to  
          all geographic areas of the state as required by their  




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          guidelines.  

          Since their inception, the tax credit programs have helped  
          finance more than 100,000 affordable rental housing units  
          and have leveraged $3 billion in additional private and  
          public funds.


           Proposed Law  :

          Senate Bill 73 increases the cap on state low-income  
          housing tax credits from $50 million per year to $70  
          million per year for calendar year 2001 and indexes the cap  
          to the federal Consumer Price Index in following years.


           
          Comments  :

          1.   Purpose of the bill  .  California's population continues  
          to grow at a rapid rate, and housing construction has not  
          kept up with demand.  The Department of Housing and  
          Community Development estimates that California needs to  
          build 220,000 new homes per year through 2020 to meet new  
          demand.   In 2000, the best year in a decade, only 149,000  
          new homes and apartments were built.  This year an  
          estimated 154,000 new dwellings will be built.  In  
          addition, at least two million renter households in  
          California pay more than the recommended 30 percent of  
          their incomes toward shelter.  The author believes that  
          there is a clear need for additional resources to support  
          affordable housing development and that the low-income  
          housing tax credit program has been an effective means to  
          leverage additional private investment in affordable rental  
          housing.  

          The author also points out that, because the two programs  
          are complementary, the recent increase in the federal tax  
          credits actually exacerbates the shortage in state tax  
          credits.  SB 73 ensures that the state credits will keep  
          pace with increases in the federal credits over time.  

          2.   Heavily oversubscribed  .  The demand for state  
          low-income housing tax credits increased from $84 million  
          in 1994 to $212 million in 2000.  As a result of the  
          intense competition, only 86 of the 270 developers (32%)  




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          who applied for tax credits last year were able to receive  
          an allocation.  Almost of all of the applications are made  
          on behalf of proposed projects that are ready to proceed.   
          Increasing funding for the state tax credit program will  
          have an immediate benefit in that more of these development  
          that are already in the pipeline will be able to proceed to  
          construction.

           Support and Opposition  :  (3/26/)

          Support:   State Treasurer, Phil Angelides (co-sponsor)
                   California Rural Legal Assistance Foundation  
          (co-sponsor)
                   Western Center on Law and Poverty (co-sponsor)
                   AARP
                          Asian Law Alliance, San Jose
                   Barbara Sanders and Associates
                   BRIDGE Housing 
                   Brown, Winfield & Canzoneri, Inc.
                   Burbank Housing Development Corporation, Santa  
          Rosa
                   California Church Impact
                   California Coalition for Rural Housing
                   California Housing Consortium
                   California Labor Federation, AFL-CIO
                   California Network of Neighborhood Programs
                   California Reinvestment Committee
                   California State Association of Electrical Workers
                   California State Pipe Trades Council
                   Capital Vision Equities
                   Chico Housing Improvement Program
                   Children's Advocacy Institute
                   Children Now
                   Citizens Housing
                   City and County of San Francisco
                   City of Los Angeles
                   City of Merced
                   City of Sacramento
                   Civic Center Barrio Housing Corporation, Santa Ana
                   Coachella Valley Housing Coalition, Indio
                   Coalition for Economic Survival, Los Angeles 
                   Community Resource Associates, Clayton
                   Congress of California Seniors
                   Council of Community Housing Organizations, San  
          Francisco
                   Devine & Gong, Inc.




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                   East Bay Asian Local Development
                   East Bay Asian Local Development Corporation,  
          Oakland
                   Eden Housing, Hayward
                   Enterprise Foundation, Los Angeles
                   Forest City Development
                   Friends Committee on Legislation of California
                   General Assistance Advocacy Project, San Francisco
                   Goldrich & Kest Industries
                   Gray Panthers
                   Great Northern Corporation, Weed
                   Harbor Interfaith Shelter, San Pedro
                   Homeward Bound of Marin
                   Housing Authority of the County of Santa Clara
                   Housing California
                   Housing Council
                   Inglewood Neighborhood Housing Services
                   JERICHO
                   JRT and Associates, Sausalito
                   La Raza Centro Legal, Inc., San Francisco
                   League of California Cities
                   Los Angeles Community Design Center
                   Los Angeles Housing Law Project
                   Lutheran Office of Public Policy, California
                   Mid-Peninsula Housing Coalition, Redwood City
                   Nancy Lewis Associates, Inc.
                   Napa Valley Community Housing
                   Neighborhood House Association, San Diego
                   Nevada County Housing and Community Development,  
          Nevada City
                   New Urban West, Inc.
                   Northbay Ecumenical Homes
                   Orange County Community Housing Corporation, Santa  
          Ana
                   Orange County Congregation Community Organizations
                   Pacific American Properties, Inc.
                   Pajaro Valley Housing Corporation, Watsonville
                   People's Self-Help Housing Corporation, San Luis  
          Obispo
                   Preservation Properties, Santa Monica
                   Protection and Advocacy, Inc.
                   Related Companies of California 
                   Renee Franken Associates, Sacramento
                   Rubicon Programs, Inc., Richmond
                   Rural Communities Housing Development Corporation,  
          Ukiah




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                   Sacramento Gray Panthers
                   Sacramento Mutual Housing Association 
                   Sacramento Neighborhood Housing Services
                   San Diego Housing Federation
                   Shelter Partnership, Los Angeles
                   Sisters of Saint Joseph's of Carondelet, Los  
          Angeles
                   Southern California Association of Non-Profit  
          Housing
                   St. Peters Housing Committee, San Francisco
                   Suburban Salt
                   Shelter Partnership, Los Angeles
                   Tenderloin Housing Clinic
                   The Agora Group, Goleta
                   The California Apartment Association
                   The Fair Housing Council of San Diego
                   The PAM Companies
                   USA Properties Fund
                   Venice Community Housing 
                   West Hollywood Community Housing Corporation
                   Western States Council of Sheet Metal Workers
                   Westside Fair Housing Council, Los Angeles
                   WNC & Associates, Costa Mesa  

          Opposition  :  None received