Affordable housing under GOP tax ax?

Advocates: Congressional plan threatens $2.2B in exemptions

SACRAMENTO » Less than two months after California passed hard-fought bills to build more subsidized rental housing for the poor, affordablehousing advocates are reeling from a federal taxreform proposal that could grind that momentum to a halt and wipe out an existing program that created roughly 20,000 such homes last year.

The GOP tax proposal, if passed in its current form, would take away tax exemptions that generate $2.2 billion annually for affordable housing construction in California. For context: The recession-era elimination of state redevelopment funding in 2011 — a move widely criticized as devastating to affordable housing — amounted to losses of roughly $1 billion per year.

“This is definitely a red alert for California,” said Matt Schwartz, president and CEO of California Housing Partnership, a San Franciscobased nonprofit housing organization. “The time is now for anybody who cares about our continued ability to produce affordable rental homes

to engage.”

California had expected to build roughly 90,000 affordable housing units as a result of a $4 billion statewide housing bond — pending voter approval in November 2018 — and money from a bill by Sen. Toni Atkins, D-San Diego, which levies a fee on certain realestate transactions.

That number would be cut in half under the tax proposal, officials say.

Like other states, California relies heavily on federal tax breaks to finance affordable housing projects. The GOP tax proposal would eliminate tax-exempt private activity bonds — which helped subsidize the construction

of 20,000 affordable homes statewide last year — to help offset the cost of a lower corporate tax rate.

The plan could sharply curtail California’s efforts to help those who have been hit hardest by the housing crisis: seniors, and poor and disabled people. As details emerge, affordable housing advocates and developers are scrambling to mobilize opposition to an obscure-sounding tax policy with far-reaching, real-life implications.

“The newly released House Tax Reform bill would be catastrophic for affordable housing in California,” wrote Tia Boatman Patterson, executive director of the California Housing Finance Agency, in an alert sent Thursday to a handful of colleagues and groups, calling for “all hands on deck.”

Proponents of the tax reform plan say it will simplify a hopelessly complex tax code. And, because it would eliminate state and local deductions — another provision that has Californians howling — such a policy would discourage states like California from hiking taxes in the first place, argues state Sen. Jeff Stone, R-Murrietta.

“While some Californians will be adversely affected by an elimination of the deductions that currently exist for state and local taxes paid,” he said in a statement Friday, “a bigger question arises: Why don’t we just lower the tax burden on California’s hard working families in the State to offset the impact that comes with the removal of federal deduction for state income taxes?”

Stone was not available to address the proposal’s affordable-housing implications on Friday, and his office said staffers were still reviewing it.

The proposal could hurt affordable-housing financing

in two ways: first, by eliminating a key tax credit, and second, by making the tax credits preserved under the federal proposal less valuable.

As the corporate tax rate drops, experts say, the tax burden will automatically lighten, giving investors less of a financial incentive to buy the credits, which are used to help pay for the costs of building a subsidized home.

Sen. Jim Beall, the South Bay Democrat who carried Senate Bill 3, which put the affordable-housing bond on next year’s ballot, said the proposal “will hurt thousands of California families, seniors and vets.”

“Giving big tax cuts to wealthy corporations at the expense of middle-income and low-income families who cannot afford to buy a home or rent an apartment is cruel,” Beall said in a statement to this news organization. “I urge Californians to contact their congressional representative about this bill and tell them to leave the Low-Income Housing Tax Credit and New Market Tax Credit programs untouched.’’

Carolina Reid, assistant professor of city and regional planning at UC Berkeley, said the proposal would be “absolutely devastating” for the state.

“California, with the housing package, was taking such a leadership role in addressing the housing crisis, and that can be completely undermined by these federal efforts,” she said. “It’s really troubling.”

“Giving big tax cuts to wealthy corporations at the expense of ... families who cannot afford to buy a home or rent an apartment is cruel.” — Sen. Jim Beall, 15th Senate District