California Low-Income Housing Tax Credit (LIHTC) Program

The California Low-Income Housing Tax Credit (LIHTC) program is crucial in addressing the crisis of affordable housing across the state. Because of the growing need for affordable housing, California has progressed in delivering housing solutions for low-income families, aged people, veterans, and specially abled.

 

Through the LIHTC program in California, the state aims to create and preserve affordable housing while fostering economic development and community stability throughout the state.

Affordable Housing Program in California 

The LIHTC California statewide program recognizes the importance of Housing Credit in constructing over 426,400 units for low-income families, older people, veterans, and those with disabilities. This campaign addresses, in particular, the huge need for safe and decent homes that are also inexpensive across the state.

What is CTCAC? 

The LIHTC program promotes private investment in affordable rental housing for qualifying households and is managed by the California Tax Credit Allocation Committee (CTCAC). The committee provides federal and state tax credits for new construction and rehabilitation projects, ensuring developers meet program requirements. CTCAC oversees compliance monitoring for the first 15 years and continues oversight for up to 55 years through regulatory agreements. 

Housing Credit Allocation Process in California 

CTCAC allocates 9% and 4% federal tax credits to qualified projects. Corporations receive tax credits in exchange for providing equity to build these projects.

 

9% Federal Tax Credits:

 

• Multiplied against a project’s qualified basis to determine annual credits. 
• Awarded competitively twice per year due to limited availability. 
• Each award provides ten years of annual federal tax credits. 

4% Federal Tax Credits:

 

• Derived from tax-exempt bonds allocated by the California Debt Limit Allocation Committee (CDLAC). 
• Limited by the bond cap available to California. 
• It is also claimed annually for ten years. 

2022 Allocations:

 

• $117,721,696 in annual 9% federal credits equate to $1.18 billion over ten years. 

• Over ten years, $280,130,462 in annual 4% federal credits equate to more than $2.8 billion. 

The Impact of LIHTC in California 

In California, more than 2400 organizations and businesses are part of the LIHTC program, which seeks to tackle affordable rental housing and its deprivation in the nation. The program has financed more than 3.7 million low-income family homes since 1986, providing huge economic advantages:

 

1. 426,433 homes have been developed or preserved in California.  
2. 682,140 jobs have been supported for one year.   
3. 918,304 low-income households have been served.   
4. $77.196 billion (approximately $240 per person in the US) came from earnings and business profits. 
5. $26.77 billion (around $82 per individual in the US) was generated from taxes collected. 

The Importance of Low-Income Housing Credits in California 

In California, affordable housing construction and rehabilitation funding significantly depends on the low-income housing credit program. It encourages private investments and guarantees that all these projects can result in profit.

 

1. Provides essential funding for developers.   
2. Combines state and federal credits to cover funding gaps.   
3. Administered and awarded competitively by CTCAC.   
4. Encourages private investment in affordable housing.   
5. Supports the development of safe, decent, and low-income housing in California.   
6. Contributes to California’s economic vitality. 

The Need for Affordable Housing in California 

Despite the substantial influence of the housing loan on our country, there is certainly a larger requirement for low-cost houses to satisfy tenants’ demand. In California:

  

1. Among those renting homes, 1,751,882 families spend over half their earnings on rent, making it hard for them to afford other essentials such as medical services, transportation, and balanced diets. 
2. Someone earning minimum wage must work at least 83 hours each week to pay for a single-room apartment. 
3. 329,440 more low-priced houses could be built in California with the investment from the Affordable Housing Credit Improvement Act. 

Compliance and Monitoring of Tax Credit Projects 

LIHTC compliance and monitoring ensures that tax credit projects meet safety and affordability standards. CTCAC oversees progress and ensures adherence to regulatory agreements and federal requirements.

 

1. Monitors project milestones and reservation requirements.  
2. Verifies income levels and rent limits.   
3. Conducts physical inspections for safety and habitability.   
4. Requires annual reporting from project owners.   
5. Reports non-compliance to the IRS.   
6. Ensures projects maintain federal and state standards.

New Developments in California LIHTC 

California has declared an annual boost of $500 million for its efforts to spur low-income housing developments. This fund will be made available in 2020 via a non-competitive procedure under the California Tax Credit Allocation Committee (CTCAC).

 

Key proposed changes include utilizing a 130% basis increase with the new state credits to enhance project viability. CTCAC has proposed 37 changes to the LIHTC program and will host public consultations in September to bring out these variations and collect opinions from different parties involved. 

Conclusion 

The LIHTC program is crucial in addressing California’s affordable housing crisis. Using federal and state tax credits promotes private investment and provides quality housing construction for low-income people and families.

 

The LIHTC program continues to be a fundamental part of California’s strategy for providing safe, affordable housing and promoting economic development even as the state finds new ways to innovate and expand its efforts.