<\/p>\nAdd Preferred Source<\/p>\n
<\/a><\/p>\n
But LIHTC investors\u00a0could now face new risk under the proposed legislation because of their broader corporate relationships with private prison or detention operators. Affordable housing industry insiders say the result could be fewer bidders for tax credits, leading to \u201cdisastrous\u201d delays for projects already struggling under high interest rates, rising insurance costs and persistent funding uncertainty.<\/p>\n
\u201cThese are huge corporations and their default is to pull back when there is uncertainty as to whether or not they\u2019ll be able to earn the return they are paying for \u2014 they will step back and not make those investments,\u201d said Ari Beliak, CEO of Merritt Community Capital Corporation, a LIHTC syndicator that raises money from investors and channels it into affordable housing projects.<\/p>\n
Article continues below this ad<\/p>\n
The result, he said, is that a number of them \u201chave ground to a halt.\u201d<\/p>\n
One of those projects is a 15-story, 202-unit workforce housing project long planned to rise at 960 Howard St. in downtown San Francisco and serve renters making between 30% and 70% of the area median income. The project\u2019s developer, oWow, is slated to receive $25 million in tax credit equity from U.S. Bank, and confirmed it is ready to break ground. But construction will now likely be delayed after the transaction did not close this week as expected \u00a0\u2014 a setback that comes as San Francisco faces another sharp run-up in housing costs, with rents climbing at double-digit rates amid a fresh wave of AI industry-driven wealth reshaping the city\u2019s economy.<\/p>\n
A representative for U.S. Bank, which has invested over $5 billion in LIHTC equity over the last three decades, confirmed to the Chronicle that it has halted tax credit transactions that were set to close in recent weeks, citing \u201cuncertainty created by AB 2465 and AB 1675 as currently drafted.\u201d<\/p>\n
\u201cWe are taking a measured approach consistent with how other investors and syndicators are responding,\u201d said U.S. Bank spokesperson Kaitlyn Domer. \u201cLike others in the market, we have temporarily paused the closing of certain transactions involving California state tax credits while legislative language continues to evolve.\u201d<\/p>\n
Domer said that the bank\u2019s approach to temporarily pause its LIHTC deals affects \u201conly a few transactions and does not reflect a broader pullback.\u201d She also said that the decision is not unique to U.S. Bank, but \u201creflects a broader market response.\u201d<\/p>\n
Article continues below this ad<\/p>\n
Affordable housing advocates say that other projects have also been stalled and many more could be impacted unless the legislation provides a carve-out for affordable housing tax credits. The California Housing Partnership, or CHP, which works to facilitate local tax credit transactions, is tracking deals totaling close to $100 million in state tax credit value that are now\u00a0potentially in jeopardy after investors communicated they are pulling back.\u00a0<\/p>\n
\u201cThe original language in these bills had the inadvertent effect of discouraging large financial corporations from purchasing state housing tax credits,\u201d said CHP CEO Matt Schwartz, effectively \u201cfreezing their ability to close on commitments they had made to invest in dozens of affordable housing transactions. This has led to numerous delays and requests to the State Treasurer\u2019s office for extensions.\u201d<\/p>\n
CHP has been advocating for amendments with Assembly Members Alex Lee and Liz Ortega, the respective authors of AB 1675 and AB 2465. Schwartz said the organization is “appreciative” to have received commitments \u201cto amend the bills to resolve these problems.\u201d<\/p>\n
Ortega, D-San Leandro, declined to comment on her bill.\u00a0<\/p>\n
\u201cI have committed to amending AB 1675 to make clear that the bill will not withhold state tax credits for affordable housing developments,\u201d Lee, D-San Jose, said in a statement. \u201cExpanding access to housing is one of my top priorities, and the amendments will provide certainty for investors and developers to continue building affordable housing without disruption.\u201d\u00a0<\/p>\n
Article continues below this ad<\/p>\n
But when it comes to building affordable housing, timing is critical. Industry insiders said that the legislation\u2019s language must be amended by the end of June to avoid threatening the viability of multiple housing projects. The bills passed the Assembly last month, and are now in the Senate. If the measures pass the Senate, they must return to the Assembly for a final vote before heading to the governor\u2019s desk, where they must be signed or vetoed by Sept. 30.\u00a0<\/p>\n
Typically, affordable housing projects depend on assembling a fragile stack of multiple public funding sources, each with its own rules and timelines. The tax credit is only one piece of that puzzle. If a major investor pauses or delays commitments, even temporarily, developers can miss financing deadlines, lose other committed subsidies or be forced to rework entire deals \u2014 potentially delaying construction for months or killing projects altogether.\u00a0<\/p>\n
\u201cFinancing for affordable housing and getting to the actual construction and completion of projects is a lot more complicated versus market rate construction,\u201d said Paul Schafer, public policy manager for the California Council for Affordable Housing. \u201cWith market rate, you can charge increased rents to offset and recoup some of your costs and get larger loans. For the affordable side, there is a greater need for state subsidies, tax credits and other investments.\u201d<\/p>\n
Schafer said his group has also been advocating to exempt state tax credits from the pending measures, which he described as \u201cfar too broadly written to include business entities that have their investments in multiple different things\u201d \u2014 including affordable housing.\u00a0<\/p>\n
Article continues below this ad<\/p>\n
\u201cThese banks have subsidiaries, they have mutual funds and investments in a lot of different things, and that\u2019s where it just becomes very complicated,\u201d he said. \u201cIn development, there\u2019s a level of certainty needed. This level of uncertainty here … it gives a lot of pause to our investors who look at things like this to signal whether or not it\u2019s a good investment to continue in the state of California.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Parked buses are seen at CoreCivic California City Immigration Processing Center, a privately-operated detention facility for the U.S.…\n","protected":false},"author":2,"featured_media":347915,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[7,9,8,1011,14,13,2013],"class_list":["post-347914","post","type-post","status-publish","format-standard","has-post-thumbnail","category-california","tag-california","tag-california-headlines","tag-california-news","tag-housing","tag-immigration","tag-politics","tag-us-and-world"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/347914","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=347914"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/347914\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/347915"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=347914"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=347914"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=347914"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}