At the national level, the federal corporate tax cuts that went into effect on January 1, 2018, have led to lower equity pricing in the Low-Income Housing Tax Credit (LIHTC) market. This has caused delays for affordable housing developments that now have to find alternative funds to fill the gap or redesign projects to cut costs. While it’s expected that tax credit pricing will stabilize in 2019, pricing will still be lower than pre-tax cut levels and LIHTC projects will try to fill gaps with other sources of funds, including the Affordable Housing Program (AHP).
Uncertainty still surrounds the issue of Opportunity Zones, which were identified for all states at the end of 2018. Proponents are optimistic that the tax benefits they create will be used with LIHTC equity to fill financing gaps to build more affordable housing. Other industry stakeholders fear that gentrification will speed up in disadvantaged communities designated as Opportunity Zones and displace current residents.
In our region, California stands out as a state where considerable momentum is gathering on the solutions side in the face of a continuing housing emergency. In 2018, bills were passed to increase transit-oriented housing development and streamline the approval process for
At the national level, the federal corporate tax cuts that went into effect on January 1, 2018, have led to lower equity pricing in the Low-Income Housing Tax Credit (LIHTC) market. This has caused delays for affordable housing developments that now have to find alternative funds to fill the gap or redesign projects to cut costs. While it’s expected that tax credit pricing will stabilize in 2019, pricing will still be lower than pre-tax cut levels and LIHTC projects will try to fill gaps with other sources of funds, including the Affordable Housing Program (AHP).
Uncertainty still surrounds the issue of Opportunity Zones, which were identified for all states at the end of 2018. Proponents are optimistic that the tax benefits they create will be used with LIHTC equity to fill financing gaps to build more affordable housing. Other industry stakeholders fear that gentrification will speed up in disadvantaged communities designated as Opportunity Zones and displace current residents.
In our region, California stands out as a state where considerable momentum is gathering on the solutions side in the face of a continuing housing emergency. In 2018, bills were passed to increase transit-oriented housing development and streamline the approval process for development of new supportive housing. A proposal to expand the state’s Low Income Housing Tax Credit by $500 million annually is pending, along with a bill designed to allow for taller and denser affordable housing developments on 100% affordable projects by way of an enhanced affordable housing density bonus. The state’s 2018-2019 budget would include nearly half a billion dollars for the Affordable and Sustainable Communities program, which funds development that reduces greenhouse gas emissions.
Newly elected Governor Gavin Newsom appears to be crystal clear on the urgency of the housing crisis facing his state, making a bold debut on the affordable housing policy stage by proposing both sticks and carrots to address it. As the editors of his hometown paper, the San Francisco Chronicle, put it, his “threat to deny transportation funds to cities that don’t produce sufficient housing has upset local officials from Lafayette to Los Angeles. It’s as sure a sign as any that the new governor is onto something.” Carrots come in the form of new incentives for cities that meet short-term housing goals, billions of dollars in added funding for affordable housing and homelessness services, and a reincarnation of local redevelopment agencies, which is a priority for many.
But in a state where, according to a USA Today poll, nearly half the voting population feels they can’t afford to live, many factors continue to inhibit production of new housing stock, including:
- Construction and overall development costs
- Local development and land use fees
- Lengthy permitting and development timelines
- Regulatory requirements
- Community opposition to affordable housing
Arizona is now third-worst in the nation for affordable housing, with a shortage of 165,000 units. In Phoenix, once one of the West’s most affordable cities, rising rents have left 46% of area renters spending more than 30% of their incomes on housing. The Arizona Republic tells us that the warning cries are being heard not just from advocates and people in need of affordable housing, they are also coming from companies that need to attract employees, government and localities looking to attract companies by offering livable communities, and developers that want to fill apartments and homes.
Arizona also has a large population of seniors who are less prepared than ever to enter retirement, and who would benefit from affordable housing solutions with additional supports, including food, transportation, social workers, and help navigating the healthcare system. Developers who could provide these services are challenged by the inability to include resident services expenses in an operating budget when applying for AHP funding.
The Arizona State Legislature is considering several proposals that would direct millions of dollars toward affordable housing for families, youth, and people with serious mental illness. Advocates are especially encouraged to see bipartisan support for SB 1471, which could raise as much as $12 million in new funding to house youth, families, and individuals with mental illness, and for SB 1300, which would clarify the property tax exemption for Arizona nonprofit LIHTC developers and owners.
Southern Nevada, which was ground zero in the housing crisis a decade ago, is now, according to the New York Times, “the epicenter of the affordability crunch, with low-income residents squeezed out of once-affordable apartments by working-class refugees fleeing from California’s own rental crisis.”
For extremely low-income households in the state of Nevada, there are only 19 homes per 100 who need them, the lowest number in the country, according to the National Low Income Housing Coalition. For very low-income households, there are 38 affordable homes per 100 renter households, and for 47% of those households paying the rent takes up over half their monthly income.
In the Nevada Legislature, a handful of bills to address the lack of housing throughout the state have been submitted, including five from the body’s Committee to Study Issues Regarding Affordable Housing, an interim committee formed to look at the issue. These include bills that would allow local municipalities to subsidize affordable housing projects without having to borrow and pay back funds from the general fund, would create a $10 million per year LIHTC-style tax credit that advocates say could generate $90-100 million in new affordable housing, and would standardize legal definitions and create three tiers of affordable housing—one tier based on residents having 60% of area median income (AMI), a second tier based on 60-80% of AMI, and a third based on 80%-120% of AMI, which would be so-called workforce housing.
The Federal Home Loan Bank of San Francisco’s Affordable Housing Program (AHP) and other community and economic development tools and resources continue to be part of the solution to the affordable housing crisis we face in Arizona, California, Nevada, and other states where the Bank’s member financial institutions do business. The Bank’s Affordable Housing Advisory Council (Advisory Council) is pleased to present this annual report, which describes how the Bank’s Community Programs and related activities contributed to expanding access to affordable housing and economic opportunities in 2018.