Report 2020-108 Recommendation 12 Responses

Report 2020-108: California's Housing Agencies: The State Must Overhaul Its Approach to Affordable Housing Development to Help Relieve Millions of Californians' Burdensome Housing Costs (Release Date: November 2020)

Recommendation #12 To: Tax Credit Allocation Committee, California

To ensure stronger enforcement that encourages project owners to keep housing affordable and habitable, the Tax Committee should amend its regulations to take more meaningful disciplinary action against housing project owners that show patterns of noncompliance across multiple inspections. These changes may include but are not limited to the following actions:
- Develop clearer guidance for penalizing project owners who have a history of noncompliance when applying for tax credits for future projects; the guidance should establish the specific conditions that would warrant imposing penalties on a housing project.
- Include in its regulations procedures for imposing fines and change guidance to permit the committee to impose fines if a housing project shows a pattern of certain types of noncompliance, regardless of whether the noncompliance is corrected during the correction period.

Annual Follow-Up Agency Response From October 2022

On July 20, 2022 the CTCAC staff amended and the CTCAC Committee approved and adopted regulations Section 10337(f)(6) to impose more meaningful disciplinary action against housing project owners that show patterns of noncompliance across multiple inspections. It also developed clear guidance for penalizing project owners regardless of whether the non-compliance is corrected and had published Compliance Fines for 2022 on its website. This recommendation has been fully implemented.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

The Tax Committee provided documentation to show that it updated its regulations to impose more meaningful disciplinary action on housing project owners who show patterns of noncompliance across multiple inspections. It also provided its compliance fines for 2022.

1-Year Agency Response

CTCAC updated the Fine Schedule and published it in Regulation on June 16, 2021. The change to the Fine Schedule updated some fines to be more punitive for certain violations and added violations for all types of physical noncompliance on properties, rather than the previous partial list of physical noncompliance. In addition CTCAC is proposing the following language be added to the final regulation change packet to go before the Committee by the end of the calendar year. Section 10337(f):

(6) Reoccurring or repeated noncompliance - CTCAC shall issue fines of up to $500 per instance of repeated or reoccurring noncompliance violations noted in separate monitoring cycles. CTCAC defines repeated or reoccurring violations as 25% or more instances of the current monitoring inspection having the same noncompliance issues as found in the previous monitoring cycle.

Areas of repeated or reoccurring noncompliance include (but are not limited to):

a. Repeat Uniform Physical Condition Standards (UPCS) Health and Safety Violations and Common Area Violations

b. Re-occurring patterns of units not turn-key ready and advertised within 60 days of unit vacancy date

c. Re-occurring patterns of missing or the incorrect use of CTCAC required forms

d. Re-occurring misuse of Utility Allowance methods

e. Re-occurring patterns of over-income households

f. Re-occurring patterns of over-charged rents

g. Re-occurring patterns of incomplete or missing re-certifications

h. Service Amenities not provided within Federal Compliance period

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

At the recommendation of this audit, CTCAC reviewed its regulations to determine where changes could be made in order to adhere to the recommendations. CTCAC staff currently tracks the type of noncompliance offenses resulting in an issuance of IRS Form 8823. CTCAC staff has expanded the data collection to track the type of noncompliance offense, when it was identified, and at which project. Using the data collected and considering the wide variety of instances of noncompliance, CTCAC evaluated the range of severity of the noncompliance offenses in order to determine which ones should result in negative points or fines due to patterns of repeated offenses. CTCAC engaged consulting services and one of their tasks is to find the best methodology for determining patterns of noncompliance and assessing penalties. CTCAC is outlining what constitutes patterns of repeated offenses, and which type of noncompliance offenses will result in the assessment of negative points or fines. Following adoption by the Committee, these changes will be in place by November 2021. CTCAC is updating its fine schedule and will publish it to the CTCAC website for public comment, then adoption by the Committee at the June 16, 2021 Committee meeting.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

Compliance Section management is currently updating the Fine Schedule. The schedule will provide more detail relating to when a project can be fined and the dollar amount each fine warrants. In addition, Compliance Section management is working towards developing guidance to be added to the Fine Schedule, addressing additional sanctions to project owners who have a history of repeated noncompliance. Following approval by CTCAC Executive Director, management will propose changes to the CTCAC regulations.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2020-108

Agency responses received are posted verbatim.