LA developers find affordable housing credits worth less under new tax code

Tax experts say the reduced funding will mean fewer homes built

Los Angeles /
Mar.March 09, 2018 01:08 PM
Affordable housing complex (Credit: Moore Ruble Yudell)

In Los Angeles, where the city has been trying to push developers to build more affordable housing, the new federal tax code appears to be pushing back. In allowing businesses greater flexibility with their financials, the $1.5 trillion tax cut President Trump signed in December has undercut a source of funding for affordable housing developers, the Los Angeles Times reported.

Developers are now finding the tax credits used to build affordable housing are worth less, creating massive budget holes and effectively delaying projects. Investors who buy these tax credits in exchange for equity in a project are already paying 11 percent less than they did in 2016, California Tax Credit Allocation Committee’s Mark Silver told the Times.

The Low Income Housing Tax Credit pays for anywhere from 20 to 70 percent of development costs of all below-market rental properties, according to Novogradac & Co. The New York-based accounting and consulting firm estimates 235,000 fewer homes will be built nationwide over the next decade as a result.

Statewide, California has been working to increase the amount of affordable housing by funding subsidized units through a series of bills. Gov. Jerry Brown signed a housing package in October, including the controversial Senate Bill 2 — Affordable Housing and Jobs Act Fee — and Senate Bill 35. SB 2 charges a fee on all real estate transactions, while SB 35 allows developers to bypass some of the bureaucratic process for new housing development.

In L.A., voters have approved significant measures to increase the amount of housing. In 2016, Measure HHH and Measure JJJ were both approved in ballot initiatives. Measure JJJ requires multifamily projects to set aside up to 40 percent of the units for low-income residents and provides incentives to developers who provide affordable units. Measure HHH will allow for 10,000 new units of housing for the homeless with $1.2 billion in bonds. [LAT] — Natalie Hoberman


Related Articles

arrow_forward_ios
Greenville, California after the Dixie Fire (Getty)
Wildfire insurance moratorium expires, allowing insurers to drop homeowners
Wildfire insurance moratorium expires, allowing insurers to drop homeowners
Sola Impact's Martin Muoto and 11001 Vermont (LinkedIn, The Architects Collective)
Sola Impact plans another 80-unit Opportunity Zone project
Sola Impact plans another 80-unit Opportunity Zone project
Gov. Gavin Newsom (Getty)
California Gov. Newsom wins recall election; homeless, housing crises loom
California Gov. Newsom wins recall election; homeless, housing crises loom
From left to right: Gov. Gavin Newsom, Kevin Faulconer, Kevin Paffrath, Larry Elder and John Cox (Getty)
Here’s where the leading gubernatorial recall candidates stand on housing
Here’s where the leading gubernatorial recall candidates stand on housing
Real estate developers, investors and brokers have contributed $513,000 to Larry Elder’s campaign to unseat Governor Gavin Newsom (Getty)
Real estate industry gives $513K to Larry Elder in California recall election
Real estate industry gives $513K to Larry Elder in California recall election
The Oakland Coliseum redevelopment plan (MLB)
California public land now battleground in fight over affordable housing
California public land now battleground in fight over affordable housing
(Getty)
LA requiring property owners to list affordable units publicly
LA requiring property owners to list affordable units publicly
The Altana and Renaissance; Two buildings that the CSCD were involved with in the past year (Waterford, The Renaissance)
LA explores joining the state’s luxury-to-middle-income housing program
LA explores joining the state’s luxury-to-middle-income housing program
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...