California Tax Credit Allocation Committee (CTCAC)

While upgrading California’s credit rating last month, Moody’s Investors Service also issued a shot across the bow of the state’s high cost of living, warning that it could gradually become “a greater drag on economic expansion if it limits the state’s population growth.”

High costs are predominantly a barrier to lower income residents, but if costs continue to rise they will start to erode the purchasing power of the state’s higher income residents, Moody’s points out.

California is struggling with a severe shortage of affordable housing. The gap between demand and supply is large and there are significant regulatory constraints on builders. This is a serious financial burden, particularly for middle-class homeowners and renters. It is also weighing on the economy as it impedes the ability of workers to relocate in order to fill the rising record number of open jobs.

Already, California has the highest share of severely burdened homeowners and the second highest share of severely burdened renters. The state trails only Hawaii in terms of housing affordability, according to the National Association of Realtors. On average, California homes are more than 50 percent less affordable than homes elsewhere across the U.S.

In 2013-2017, the median gross rent nationally stood at $982 compared to $1,358 in California, according to the U.S. Census. Over the same period, the median value of owner-occupied homes nationwide was $193,500 compared to $443,400 in California.

The high cost of housing plays a role in poverty. Averaged over 2014-2016, California’s official poverty rate was 14.5 percent, almost a full percentage point higher than the national poverty rate of 13.7 percent, according to Moody’s (citing U.S. Census data).

Clearly, the future of California residents’ health, safety and wealth depends on access to workforce housing that is affordable.

With these concerns in mind, shortly after she took office Treasurer Fiona Ma attended 15 housing meetings and public hearings across California. She met with housing specialists, Native American tribe members, homeless advocates, specialists focused on special needs housing, labor unions, non-profit and for-profit developers, investors, and consultants, among others. She learned first-hand what people around the state are thinking about when it comes to the development of additional affordable housing.

Treasure Ma and her staff within the State Treasurer’s Office (STO) are still researching and digesting some of the feedback, but there was general agreement among stakeholders on the need to streamline the process by which tax credits are awarded.

STO staff carefully considered the comments received and finalized a set of recommendations for the California Tax Credit Allocation Committee (CTCAC) to consider. CTCAC, chaired by Treasurer Ma, adopted the recommended regulatory changes at a meeting in Sacramento on October 28. The California Debt Limit Allocation Committee (CDLAC), which allocates bonding authority for housing projects and is also chaired by Treasurer Ma, adopted similarly revised regulations on October 16.

Treasurer Ma and senior staff members in Riverside, the first stop on what would become a 15-city swing through the state to develop ideas with stakeholders about how to revamp regulations and speed tax credits for workforce housing to developers.

The revised regulations will streamline the application process to promote production and improved cost containment efforts. Treasurer Ma anticipates leading a second round of reviews and revisions within the coming year.

Among the notable revisions adopted in October are changes related to the implementation of millions of dollars in additional state tax credits the California Assembly’s budget committee included in AB 101 as approved by the Legislature and Governor.

CTCAC administers the federal and state low-income housing tax credit programs. Traditionally CTCAC has administered approximately $100 million per year in state tax credits. Now, with the passage of AB 101, CTCAC will be providing an additional $500 million in state tax credits in 2020 specifically targeted to new construction of affordable units. AB 101 sets the stage for similar amounts in future years, depending on the state budget and a willing Legislature.

The first application deadline for developers to apply for the new state tax credits under the proposed regulations is November 15 – two months earlier than originally scheduled. Once reviewed by staff, the applications will go to CTCAC’s members for a vote of approval on January 15.

The newly approved regulations require winning projects to be “shovel-ready” within 180 days of tax credit allocation and favors projects that maximize the number of new housing units produced under the tax credits allocated. This will ultimately fast-track housing production.

By acting quickly through CTCAC to devise and align critical new regulations with the actions of the legislature and governor, the state is now in an excellent position to support the more rapid development of affordable housing statewide.

The STO has already received feedback from the developer community that there is keen interest in these new tax credits and that there is a high likelihood the program will be oversubscribed.

This is good news for Californians and represents one more important step toward solving the demand for more affordable housing in California.

Cost of Living Index – California vs. US¹

Housing is the biggest factor in the cost of living difference between California and the national average found elsewhere. The median home price in California is $552,800.

¹According to BestPlaces. An amount below 100 means California is cheaper than the US average. A cost of living index above 100 means California is more expensive.

BCA News in Brief

ScholarShare

ScholarShare 529, which happens to be celebrating its 20th anniversary, has been awarded a prestigious gold rating from Morningstar Inc. The rating makes California’s plan one of the four top college savings plans in the nation – joining Virginia’s Invest529, Illinois’ Bright Start College Savings, and Utah’s my529. Morningstar, which evaluates mutual funds, wrote that all the gold plans stood out “for their low costs, strong stewardship, and exceptional investment options.”

CPCFA / CalCAP

The California Air Resources Board (CARB) is proposing a significant increase to the 2019-2020 budget of the State Treasurer’s Office California Pollution Control Financing Authority (CPCFA), which will translate into the financing of about 15,000 new heavy-duty truck purchases through the California Capital Access Program (CalCAP) On-Road Truck Loan Assistance Program. The program helps small business truckers and fleet owners comply with CARB’s In-Use Truck and Bus Regulation that will result in 2,810 tons of NOx and 207 tons of ROG emission reductions. The Treasurer’s CalCAP On-Road Truck Loan Assistance Program is anticipating unprecedented demand in future years, as we continue our 10-year partnership aimed at encouraging truck owners to upgrade their heavy-duty trucks to meet current emissions standards. Treasurer Ma recently announced the landmark program has now financed 25,000 cleaner-burning diesel trucks, the equivalent of removing 4 million passenger cars from the road and 145 tons per year of toxic particulate matter.

Note: Each month we will be sharing information on one of our BCAs and explain how the programs behind the acronym are enhancing the lives of Californians all across the state -- and how you, your family, or your business can share in, and contribute to, California's prosperity