The governor’s veto of two bills, along with pending changes to the state’s low-income housing tax credit program, will impact the future of affordable housing in California.
Brown Vetoes Affordable Housing Bills
On Saturday, October 10, 2015, California Governor Jerry Brown vetoed two bills that supporters believe would have increased the number of affordable apartments in the state. AB35 would have boosted the annual state low-income housing tax credit by $100 million for each of the next five years, while SB377 would have permitted the certification of that credit. Both bills had overwhelming support in the state legislature and were part of a larger package that would have expanded already existing tax credits or created new ones.
In the governor’s veto message, he cited the need to maintain California’s fiscal stability. The governor’s veto represents yet another blow to affordable housing advocates in the state. They had been previously unsuccessful in garnering the required two-thirds vote needed in the legislature earlier this year to establish a permanent funding source for affordable housing in the state. This would have partially replaced the loss of redevelopment funds.
TCAC to Consider Regulation Changes
On Wednesday, October 21, 2015, the California Tax Credit Allocation Committee (TCAC) is set to adopt a series of changes to its low-income housing tax credit program. Potential changes have been in the works for several months and have evolved over time – particularly those related to so-called “back end” provisions which had drawn multiple comments.
From proposing to significantly limit the amount of equity that could be withdrawn from a development after the initial 15 year compliance period, to required “equity sharing”, TCAC has now withdrawn the majority of these proposals . It currently proposes that both short-term and long- term rehabilitation needs of these developments be addressed before it will grant its approval for refinancing, sale, or preservation.
There are multiple suggested changes to the program and users are strongly encouraged to visit TCAC’s website (www.treasurer.ca.gov/ctcac) to review them, particularly once the final version of the regulations are adopted. A few other proposed changes include the maximum permitted developer fee, the tie-breaker, and increasing the special needs “goal” to 25% of the total annual competitive credit.
What does CohnReznick think?
It is unfortunate that Governor Brown chose to veto AB35 and SB377, seemingly without recognizing the desperate need for more affordable apartments throughout the state and the economic benefits, including job creation that the housing tax credit creates. CohnReznick will continue its involvement in efforts that result in increased production of affordable housing in the state and around the country.
With respect to TCAC’s regulations, we will work with our clients to educate them in understanding how best to work within TCAC’s framework going forward.
For more information, please contact jeanne.peterson.
To learn more about CohnReznick’s Affordable Housing Industry services, please visit our website.