While California’s housing crisis has been well documented, what isn’t as widely understood are the financing tools we use to build affordable housing.
One indispensable tool, Private Activity Bonds, is in danger of being eliminated in the federal tax reform. This would be devastating for the millions of low- and moderate-income Californians struggling to afford housing.
After years of hard work by housing advocates and lawmakers, Gov. Jerry Brown signed a package of housing bills in September. Like the homes it would help create, the package was built on a foundation of partnerships with the federal government.
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Private Activity Bonds are used in public-private partnerships and are required for developers to obtain low-income housing tax credits. These bonds and tax credits are the building blocks of affordable housing. Ending access to the tax credits would result in the loss of $2.2 billion of financing in our state each year.
Eliminating the bonds would lead to the loss of 20,000 units of affordable housing in California each year. We need to add 180,000 units annually to keep up with demand, but current production is less than 100,000 a year.
One big misconception is that these bonds are primarily used to finance projects such as professional sports stadiums and golf courses. On the contrary, 36 percent issued in California over the past 10 years went to finance affordable housing, while 40 percent went to hospitals and 14 percent to education.
There are examples here in Sacramento. Without the bonds, it will not be financially feasible to build a proposed mixed-use development at 800 K Street, which would create much-needed housing for teachers, nurses, police officers and others so they can live near their workplaces.
Also at risk is the proposed renovation and expansion of the Twin Rivers public housing project, which would provide 200 affordable units and another 280 apartments and town homes for young workers and families.
When it comes to housing, California is in a huge hole. If Private Activity Bonds go away, then we’re being told: “Keep digging.”
Tia Boatman Patterson is executive director of the California Housing Finance Agency. She can be contacted at email@example.com.