BILL ANALYSIS                                                                                                                                                                                                    



                                                                       


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          |SENATE RULES COMMITTEE            |                    SB 73|
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                                 THIRD READING


          Bill No:  SB 73
          Author:   Dunn (D), et al
          Amended:  6/19/01
          Vote:     21

           
           SENATE HOUSING & COMM. DEV. COMMITTEE  :  7-0, 4/2/01
          AYES:  Dunn, Monteith, Ackerman, Alarcon, Costa, Escutia,  
            Romero

           SENATE APPROPRIATIONS COMMITTEE  :  11-0, 6/25/01
          AYES:  Alpert, Battin, Bowen, Escutia, Johannessen,  
            Johnson, Karnette, McPherson, Perata, Poochigian, Speier


           SUBJECT  :    Taxation:  low-income housing

           SOURCE  :     State Treasurer, Phil Angelides
                      California Rural Legal Assistance Foundation
                      Western Center on Law and Poverty


           DIGEST  :    This bill increases the amount of low-income  
          housing credits that can be allocated from $50 million to  
          $70 million for the 2001 calendar year, and adjusts the  
          amount for inflation each year thereafter.

           ANALYSIS  :    The federal Tax Reform Act of 1986 created the  
          Low-Income Housing Tax Credit Program to stimulate private  
          investment in the production and rehabilitation of  
          affordable rental housing.  The federal tax credits were  
          initially capped for each state at $1.25 per capita per  
          year.  As part of last year's omnibus budget bill, Congress  
          increased the cap on federal credits per state to $1.50 per  
                                                           CONTINUED





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          resident for 2001 and $1.75 per capita for 2002.  In  
          following years the cap will increase further by a  
          percentage equal to the rise in the federal Consumer Price  
          Index.

          Because high housing costs make it particularly difficult  
          to produce affordable housing in California, the  
          Legislature created a state low income housing tax credit  
          program in 1987 to supplement federal tax credits.  The  
          state tax credit is only available to projects that receive  
          federal tax credits and are intended to stretch the federal  
          credits over more projects.  The state tax credits are  
          currently limited to $50 million per year.

          The California Tax Credit Allocation Committee (TCAC)  
          administers both the state and federal low income housing  
          tax credit programs.  Based on a competitive application  
          process, TCAC allocates the tax credits to housing  
          developers who effectively sell the credits to investors to  
          raise capital for the construction of affordable housing  
          units.  Investors typically pay 80 cents for each dollar of  
          tax credit.  The program is currently oversubscribed by a  
          ratio of at least three to one.  Moreover, TCAC ran out of  
          state credits last year before credits could be awarded to  
          all geographic areas of the state as required by their  
          guidelines.

          Since their inception, the tax credit programs have helped  
          finance more than 100,000 affordable rental housing units  
          and have leveraged $3 billion in additional private and  
          public funds.

          This bill increases the cap on state low-income housing tax  
          credits from $50 million per year to $70 million per year  
          for calendar year 2001 and indexes the cap to the federal  
          Consumer Price Index in following years.

          This bill requires the California Tax Credit Allocation  
          Committee to review and evaluate the geographic  
          apportionment methodology of the low-income housing tax  
          credit program and report to the Legislature by June 30,  
          2002.

           Comments







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           California's population continues to grow at a rapid rate,  
          and housing construction has not kept up with demand.  The  
          State Department of Housing and Community Development  
          estimates that California needs to build 220,000 new homes  
          per year through 2020 to meet new demand.   In 2000, the  
          best year in a decade, only 149,000 new homes and  
          apartments were built.  This year an estimated 154,000 new  
          dwellings will be built.  In addition, at least two million  
          renter households in California pay more than the  
          recommended 30 percent of their incomes toward shelter.   
          The author's office believes that there is a clear need for  
          additional resources to support affordable housing  
          development and that the low-income housing tax credit  
          program has been an effective means to leverage additional  
          private investment in affordable rental housing.

          The author's office also points out that, because the two  
          programs are complementary, the recent increase in the  
          federal tax credits actually exacerbates the shortage in  
          state tax credits.  This bill ensures that the state  
          credits will keep pace with increases in the federal  
          credits over time.

          The demand for state low-income housing tax credits  
          increased from $84 million in 1994 to $212 million in 2000.  
           As a result of the intense competition, only 86 of the 270  
          developers (32%) who applied for tax credits last year were  
          able to receive an allocation.  Almost of all of the  
          applications are made on behalf of proposed projects that  
          are ready to proceed.  Increasing funding for the state tax  
          credit program will have an immediate benefit in that more  
          of these development that are already in the pipeline will  
          be able to proceed to construction.  
           
           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

           SUPPORT  :   (Verified  6/25/01)

          State Treasurer, Phil Angelides (co-source)
          California Rural Legal Assistance Foundation (co-source)
          Western Center on Law and Poverty (co-source)
          AARP







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          Asian Law Alliance, San Jose
          Barbara Sanders and Associates
          BRIDGE Housing 
          Brown, Winfield & Canzoneri, Inc.
          Burbank Housing Development Corporation, Santa Rosa
          California Church Impact
          California Coalition for Rural Housing
          California Housing Consortium
          California Labor Federation, AFL-CIO
          California Network of Neighborhood Programs
          California Reinvestment Committee
          California State Association of Electrical Workers
          California State Pipe Trades Council
          Capital Vision Equities
          Chico Housing Improvement Program
          Children's Advocacy Institute
          Children Now
          Citizens Housing
          City and County of San Francisco
          City of Los Angeles
          City of Merced
          City of Sacramento
          Civic Center Barrio Housing Corporation, Santa Ana
          Coachella Valley Housing Coalition, Indio
          Coalition for Economic Survival, Los Angeles 
          Community Resource Associates, Clayton
          Congress of California Seniors
          Council of Community Housing Organizations, San Francisco
          Devine & Gong, Inc.
          East Bay Asian Local Development
          East Bay Asian Local Development Corporation, Oakland
          Eden Housing, Hayward
          Enterprise Foundation, Los Angeles
          Forest City Development
          Friends Committee on Legislation of California
          General Assistance Advocacy Project, San Francisco
          Goldrich & Kest Industries
          Gray Panthers
          Great Northern Corporation, Weed
          Harbor Interfaith Shelter, San Pedro
          Homeward Bound of Marin
          Housing Authority of the County of Santa Clara
          Housing California
          Housing Council







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          Inglewood Neighborhood Housing Services
          JERICHO
          JRT and Associates, Sausalito
          La Raza Centro Legal, Inc., San Francisco
          League of California Cities
          Los Angeles Community Design Center
          Los Angeles Housing Law Project
          Lutheran Office of Public Policy, California
          Mid-Peninsula Housing Coalition, Redwood City
          Nancy Lewis Associates, Inc.
          Napa Valley Community Housing
          Neighborhood House Association, San Diego
          Nevada County Housing and Community Development, Nevada  
          City
          New Urban West, Inc.
          Northbay Ecumenical Homes
          Orange County Community Housing Corporation, Santa Ana
          Orange County Congregation Community Organizations
          Pacific American Properties, Inc.
          Pajaro Valley Housing Corporation, Watsonville
          People's Self-Help Housing Corporation, San Luis Obispo
          Preservation Properties, Santa Monica
          Protection and Advocacy, Inc.
          Related Companies of California 
          Renee Franken Associates, Sacramento
          Rubicon Programs, Inc., Richmond
          Rural Communities Housing Development Corporation, Ukiah
          Sacramento Gray Panthers
          Sacramento Mutual Housing Association 
          Sacramento Neighborhood Housing Services
          San Diego Housing Federation
          Shelter Partnership, Los Angeles
          Sisters of Saint Joseph's of Carondelet, Los Angeles
          Southern California Association of Non-Profit Housing
          St. Peters Housing Committee, San Francisco
          Suburban Salt
          Shelter Partnership, Los Angeles
          Tenderloin Housing Clinic
          The Agora Group, Goleta
          The California Apartment Association
          The Fair Housing Council of San Diego
          The PAM Companies
          USA Properties Fund
          Venice Community Housing 







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          West Hollywood Community Housing Corporation
          Western States Council of Sheet Metal Workers
          Westside Fair Housing Council, Los Angeles
          WNC & Associates, Costa Mesa


          NC:cm  6/26/01   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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