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
SB 73
Page 2
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%)
SB 73
Page 3
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.
SB 73
Page 4
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
SB 73
Page 5
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