Affordable Housing

1
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

2
The National Housing of 1937- Why did it come
about?
3
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.

4
What Factors are Driving the Demand for
Affordable Housing Today?
5
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

6
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

7
1990s 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

8
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

9
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

10
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

11
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

12
Tax Credits The Equity Contribution