Affordable Housing Changing Policy Focus Need for Affordable Housing From Supply to Demand Side From Federal to State & Local Governments Dominant Policy Tools Today Financing Affordable Housing: An Example

The National Housing of Why did it come about?

Changing Housing Policy Focus Housing Act of 1949 sought “a decent home and a suitable living environment for all Americans” 1990 Affordable Housing Act sought to provide all Americans “with the opportunity to afford a decent home in a suitable environment.” Today, state-sponsored inclusionary housing programs leverage market rate developments to increase the supply and foster integration.

What Factors are Driving the Demand for Affordable Housing Today?

Increasing Need Increasing income inequality Housing discrimination Restrictive zoning and building codes Diminishing supply of unassisted, low-rent housing Social issues, including insufficient job counseling, lack of health and day care

Historical Housing Assistance Programs Supply Side –Public housing programs –Subsidy of privately owned multifamily rentals Project Based Section 8 Below Market Interest and Federally Insured Mortgages Demand Side –Rental assistance to tenants Tenant Based Section 8 –Homeownership programs

1990’s Shift from Supply Side to Demand Side Supply Side –No public housing –Rehabilitation and new construction –Programs: LIHTC, HOME Program Demand Side –Income transfers –Programs: Section 8 Tenant-Based Certificates, Silent Second Home Mortgages

Shift to Local Control, Funding and Decision Making State-Administered LIHTC –Public/Private partnerships HOME Funds –Distributed to states and local jurisdictions –Require a local funding match (25%) Local Funding Sources –Tax Increment Financing

The 9% LIHTC in California The 9% Tax Credit –A competitive awards process –Amount available capped, based on population Currently, Allocated by Lottery –Because competition for credits was so fierce projects became precarious –Qualify for the lottery with minimum requirements –Current administration opposes lottery

The 4% LIHTC in California Historically, the 4% tax credit was a given –With tax exempt financing, projects are automatically eligible for the 4% credit Feds Cap the Amount of Tax-Exempt Bonds that can be Issued –With increasing demand for the 4% credit, there is concern the cap may be hit this year –Federal government may increase cap

Are we Efficiently Reaching Households in Need at the Lowest Cost? The LIHTC is the Primary Vehicle Today for Affordable Housing Production –Inefficient relative to a direct grant –Requires assembling mortgage and other financing/grants from a variety of sources Direct Rental Subsidies –Effective for households in adequate housing that are paying a large fraction of income for monthly housing costs

Tax Credits = The Equity Contribution