It’s getting even harder to build affordable housing in housing-starved San Diego.
President Donald Trump hasn’t yet made good on his promise to slash corporate taxes – but his plan is already causing real problems for low-income housing projects across the state, including at least one in San Diego.
Virtually every affordable housing project in the state has been funded by the so-called low-income housing tax credit for the past few decades.
But now, with a potential cut in corporate taxes on the table, banks are hesitant to invest in the credits. If the cuts materialize at the rates floated by Trump and Republicans in Congress, buying the tax credits now would end up as a loss over the coming years for investors. That makes investing in affordable housing for tax purposes far less attractive.
In California, low-income housing projects apply for the tax credits and if they’re awarded them, they go look for investors to buy the credits. Investors, usually banks, then bid for those credits, thus investing in the affordable housing developments.
Support Independent Journalism Today
The GOVERNMENT subsidized projects are in jeopardy because the GOVERNMENT is talking about changing the tax rate which lowers the value of the GOVERNMENT tax credits which people buy to lower the amount of taxes the GOVERNMENT takes from them to pay for it's ineffective bureaucracy. Where could the problem possibly be???
Let’s see if I’ve got this straight. Because President Trump is TALKING about cutting the CORPORATE tax rate, upper income investors are demanding to pay less for shares in low income housing projects that will give them credits against their income taxes.
Please answer a possibly dumb question. What does a cut in corporate tax rates have to do with individual investors?
This sounds to me like one more reason to delay or minimize low income housing construction, so “those people” won’t end up in MY neighborhood. I think Prof. Baxamusa has it about right. Let’s emphasize local sources for funding, not depend on federal or state government for the funding.
@Bill Bradshaw When corporate taxes are cut, there is less incentive for the corporations to pursue strategies that result in lower taxes, and the value of those strategies is less than prior to the tax cut. Thus, a corporate tax rate of 25% will result in a lower value of tax credits than a corporate tax rate of 35%.
It would be great if we had abundant local resouces for affordable housing, but we do not. The dissolution of redevelopment eliminated one resource, and the remaining resources are pittance compared to the need. Federal tax credits have aided the building of thousands of affordable units every year in CA. The diminishing of their value or, worse, their elimination, make our already serious affordable housing problem even worse.
Your remark about "those people" is either sarcastic or you live in Rancho Santa Fe. Over 50% of the households in San Diego county pay a seriously disproportionate amount of their income for housing and many people cannot afford to live here at all. 'Those people" are us!