Report 2020-108 Recommendation 6 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 #6 To: Tax Credit Allocation Committee, California

To ensure that tax credit awards are targeted to areas that require the most support from the State to finance affordable housing, the Tax Committee should immediately identify areas from which it has not received applications or areas with fewer awards per population and use that information to inform regulatory changes to attract more affordable housing developers to those areas.

Annual Follow-Up Agency Response From October 2022

On July 20, 2022 the CTCAC Committee approved and adopted regulations that included a provision "For Rural set aside projects applying in counties where no tax credit applications have been received within 5 years of the application filing date, the tiebreaker shall be increased by 5 percentage points." This change to the regulations addresses and meets the concern "... that tax credit awards are targeted to areas that require the most support from the State to finance affordable housing...". Additional points give these rural projects incentive to apply by offering a competitive advantage in a highly competitive process. CTCAC also complied by identifying areas from which CTCAC had not received applications from rural areas. CALIFORNIA CODE OF REGULATIONS TITLE 4, DIVISION 17, CHAPTER 1 Section 10325 Scoring (c)(9)(D). This recommendation has been fully implemented.

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

The Tax Committee provided the updated regulations with a provision to incentivize projects in rural areas that have not had applications in the last five years. The Tax Committee should continue to identify areas with no applications or fewer awards per population and make informed regulatory changes to continue implementing our recommendation.

1-Year Agency Response

In order to further incentivize and attract more affordable housing developers to develop affordable housing in areas with fewer awards per population CTCAC intends to propose the following language be added to the final regulation change packet to go before the CTCAC Committee before the end of the calendar year. During competitive tax credit rounds, developers seek out points that will improve their tiebreaker score, and therefore their opportunity to obtain tax credits. CTCAC only changes regulation once per year, usually at the end of the calendar year. It proposes to request Committee approval for the following Section 10325 (C):

For Rural set aside projects applying in counties where no tax credit applications have been received within 5 years of the application filing date, the tiebreaker shall increase by 5 percentage points.

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

6-Month Agency Response

CTCAC reviewed datasets including HUD population and rent burden as well as datasets previously used and considered to determine the current geographic apportionments, including county level data of renters with high housing cost burden using RS Means construction cost factor and county level percentages of households with very low income AMI. CTCAC is revisiting the geographic apportionments to ensure the distribution is equitable and addressing the areas with the highest need. CTCAC will develop policies to prioritize areas less frequently developed. This will be complete by November 2021. While no applications were received from some counties in the last 5 years, projects developed prior to that timeframe maintain affordable units for 55 years and remain available to the county's population. CTCAC reviewed current data on existing projects. Due to the low population in some counties, there may not be funding sources or investor interest for affordable housing projects. The 4% tax credit program, required to be paired with bonds allocated from CDLAC, is competitive. The program is now oversubscribed almost 3 to 1. CTCAC regulations will also be incorporated into the CDLAC regulations to ensure the highest need for affordable housing in the State is being addressed. CTCAC participates as panelists at housing conferences to promote the availability of the tax credits. Since Nov 2020, staff participated in 6 events like the NCSHA, the Novogradac Conference, and the NH&RA. CTCAC conducts statewide annual workshops. In 2021 staff conducted 11 virtual workshops and will do 8 more by end of year. The 11 workshops conducted thus far provided more than 61 hours of education to 1061 attendees. The Treasurer promoted tax credits at housing events like the "Missing Middle" webinar by Urban Land Institute OC & Inland Empire. She also met with a local developer in Butte County to visit sites for projects that may apply for tax credits in the future.

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

60-Day Agency Response

To ensure that tax credit awards are targeted to areas that require the most support from the State to finance affordable housing, we have begun communication with the State Treasurer's Office External Affairs department to develop outreach to those areas to encourage them to apply. Specifically, we have awarded disaster credits to projects in Butte County that are expected to begin construction in 2021 and 2022.

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

All Recommendations in 2020-108

Agency responses received are posted verbatim.