CHC Industry Insight

Industry Insight - September 2022

Note from the Executive Director

CHC entered this year at the tail end of two-plus years of legislative gridlock—championing an affordable housing agenda that was widely supported in the Capitol and Governor’s office, but stuck behind a powerful interest group that wasn’t willing to even talk about moving bills aimed at addressing the state’s housing crisis.

We ended the session yesterday with all three of CHC’s sponsored bills passing overwhelmingly—without compromising our values or accepting any of our opponents’ unworkable ideas.

Times have certainly changed, and we should all take this moment to recognize it.

All three of our bills—AB 2011 (Wicks), AB 2006 (Berman), and AB 2334 (Wicks)—were drafted with a single focus: To get more affordable housing built. And all three will help us do our jobs better: Opening new sites to affordable housing, accelerating approvals, supporting workers, and ensuring the state’s scarce resources are spent where they should be—on providing, safe affordable homes for all Californians.

A lot of the attention this year, as it should be, has been on AB 2011 and the leadership of Asm. Buffy Wicks (D-Richmond), who has earned every bit of the praise she is receiving as a smart policymaker, savvy legislator, and true affordable housing champion.

CHC has been proud to partner with Asm. Wicks to build the unique coalition of affordable housing providers, labor, and other groups that finally cracked the code on housing policy this year—breaking through a years-long political impasse and passing a bill with overwhelming, bipartisan support that will set a new precedent for affordable housing and labor policy for years to come.

There are lot of people to thank for this, not least Asm. Richard Bloom (D-Santa Monica), who first introduced legislation with these ideas two years ago—and who helped lay the groundwork for this year’s policy success.

Together, we achieved as decisive a win for affordable housing as I’ve seen in my years in Sacramento—and I can tell you CHC’s efforts have not gone unnoticed in the Capitol, where we are now working to secure the Governor’s signature.

Finally, I want to say a word about how we pulled this off, because more than any other person in the state, including the excellent staff of Asm. Wicks’ office, it was due to the work of Marina Wiant that this bill passed. Marina has been CHC’s policy quarterback for over a decade, and she used every bit of her deep understanding of Sacramento to go 3-for-3 this year—and score huge victories for affordable housing.

I know we’ll all get a chance to applaud her in person at next week’s CHC Policy Forum—but in the meantime I just want to say again: Way to go, Marina. This would not have happened without you.

Thank you again to every CHC member for your work and support this year, and here’s to another successful year for affordable housing!

Cheers,

Ray Pearl

Executive Director

In Case You Missed It

All three of CHC’s sponsored bills passed out of the Legislature this week. The Governor has until the 30th of September to sign or veto.

AB 2011 (Wicks) passed out of both houses on Monday. The Senate approved the measure 33-0, and the Assembly concurred by a vote of 67-4. AB 2011 would open new sites to affordable housing and create strong labor protections that support all of the workers on these essential jobs.

AB 2334 (Wicks) passed out of the Senate on Monday and out of the Assembly on Tuesday. The Senate approved the measure 29-8, and the Assembly concurred by a vote of 42-15. AB 2334 would expand the AB 1763 enhanced density bonus to 100% affordable housing developments located in low vehicle travel areas.

AB 2006 (Berman) passed out of both houses last week. The Senate approved the measure on Special Consent 40-0, and the Assembly concurred by a vote of 77-0. AB 2006 would require HCD, TCAC, and CalHFA develop a process to prevent duplicative compliance monitoring for projects that have regulatory agreements with more than one of these agencies.

Several other important affordable housing bills also passed this week. AB 2234 (R. Rivas) will establish a transparent process for obtaining post-entitlement permits in a timely manner. AB 1288 (Quirk-Silva) will increase the effectiveness of the state low-income housing tax credits. SB 649 (Cortese) will support greater access to affordable housing for people facing displacement. SB 948 (Becker) will reduce the cost of affordable housing through the creation of a pooled transition reserve.

As CHC and our partners push to make it easier for cities to approve affordable housing, the Los Angeles Times editorial board cheered the state’s expanding crackdown on cities that are making it harder and more expensive to build desperately needed new homes. HCD announced last week that it was opening the first-ever investigation led by its new Housing Accountability Unit into the City of San Francisco’s plans to add 82,000 homes over the next RHNA cycle. “San Francisco is an easy target because of its astronomical housing costs due to pricey real estate and city building restrictions and the bare-knuckle fights over housing,” writes the LAT.

The demand for affordable housing is far outstripping production across the country—with the U.S. now at least 3.8 million homes short of meeting housing needs, double the number from 2012, according to a report from Up for Growth released in July. The report, Housing Underproduction in the U.S., finds a shortage of nearly 1 million homes in California alone, the largest gap of any state in the country. Texas (322,000 units), Florida (289,000 units), and New York (234,000 units) are the next closest states. “Four years ago, the nation’s housing affordability problems appeared to be concentrated along the coasts and in the Southwest,” the report concludes: “The crisis has deepened and is more widespread."

Affordable Housing in the News

It has been a year of positive stories about affordable housing and the work of CHC—much of it focused on our sponsored bill AB 2011. The Sacramento Bee was the first to endorse the legislation in a May editorial which concluded that “the need for this kind of housing legislation is self-evident at this point.” A few weeks later the Los Angeles Times followed suit: “If you care about solving the housing crisis and want California lawmakers to put the interests of the whole state over the demands of the few,” said the LAT Editorial Board, “then keep your eye on AB 2011.” A New York Times opinion piece made the same point in August, applauding CHC’s policy approach: “AB 2011 is an elegant effort to address a complex crisis. California needs a lot more housing. Strip malls and office parks are ideal places to build it. And guaranteeing livable wages is a way to make construction a much more attractive job.” A few weeks ago, the San Francisco Chronicle joined in as well, saying “Downtown San Francisco is dying. This bill could help save it.” Finally, in case you missed it, a CalMatters op-ed connected CHC’s work to the climate crisis: “If legislators are serious about addressing housing and climate change in California in a meaningful way, they should support AB 2011.”

Federal Update from David Gasson

It was a treat seeing all the posts on social media of friends and colleagues enjoying the summer months. Whether it was family travel, attending a concert or sporting event, various philanthropic feats of athleticism or getting kids ready for school, it was heartening to see the focus on family and friends while recharging our batteries.

I must first note, with particular sadness, the passing of Representative Jackie Walorski (R-IN) and two of her staff in an automobile accident. Jackie was our House Republican champion for the AHCIA and a very strong supporter of affordable housing. She worked very closely with her House colleague Rep. Suzan DelBene (D-WA) and Senators Maria Cantwell (D-WA) Todd Young (R-IN) on our LIHTC agenda and was ready to lead the fight for more resources in the next Congress. The personal loss aside, it will be task replacing her advocacy on the Ways and Means Committee.

While July and August can be quiet months on the legislative front, this was not the case this summer. The Senate finally passed a reconciliation package, the Inflation Reduction Act, provides incentives to promote energy security and address climate change, extends expanded Affordable Care Act premium subsidies, and reduces the deficit. The bill passed the Senate on August 7th by a party line vote of 51-50, with Vice President Kamala Harris casting the tie-breaking vote. The House returned from its recess on August 12th and passed the legislation by a party line vote of 220-207. President Biden signed the bill into law on August 16^th.

The bill is primarily paid for by a new 15 percent minimum tax on adjusted book income of certain large corporations; an excise tax on stock buybacks; allowing Medicare to negotiate prescription drug prices; and by increasing funding for the Internal Revenue Service to improve tax compliance. Of particular note for our industry, the bill would allow corporations to use general business tax credits (including the LIHTC) to offset up to 75 percent of the combined regular and minimum tax.

There are no provisions in the bill addressing LIHTC resources, but we are appreciative of the extraordinary efforts made by Senator Maria Cantwell (D-WA) and several of her Senate colleagues to advocate inclusion of our LIHTC agenda in the final bill. Senator Cantwell and I strategized regularly and included key Senators and staff in these discussions. It became clear very early in the conversations that Senators on both sides acknowledge the breath of the affordable housing crisis as well as the affect housing supply is having on inflation. This narrative and the outreach we had with Senate leadership give me much confidence we will get some of our agenda addressed in the end-of-year legislative scrum.

August 5^th was the deadline for interested parties to submit their comments to the federal regulators looking to institute new rules for the Community Reinvestment Act. The Housing Advisory Group, as well as many of our colleague organizations, submitted comments and we now look forward to working with the regulators on revised rules that will augment the investment in and production of affordable housing.

We have also kept the pressure on our friends at Treasury and the IRS to release the proposed regulations for the Average Income Test, expected by September 30^th, as well as address the industry’s request to extended Place in Service (PIS) deadlines. I have worked directly with House and Senate tax staff and Members to seek expeditious release of these regulatory changes and their counterparts at Treasury have been accommodating of these requests. We have been told the staff at Treasury is working as expeditiously as possible on these and other proposed regs and are simply overwhelmed. We remain guardedly confident the AIT revised regulation will be released prior to 9/30.

We are also working on the FY2023 budget, which is due by September 30^th. It is unlikely the House and Senate will come to an agreement by then and they will, as is usually the case, pass a continuing resolution (CR) to get them into the Fall where negotiations will continue. The House and Senate THUD subcommittees have both proposed significant increases in the HUD budget so we look forward to seeing how negotiations proceed.

Looking ahead, the industry will begin to work on the next version of the Affordable Housing Credit Improvement Act (AHCIA) while working on the end of year legislative play and what we might get done before 12/31/22. We encourage you and your colleagues around the country to weigh in with comments on the 2023 agenda and what we might want to consider including in our consensus housing bill (AHCIA).

I thank you all for your continued advocacy and support. We will likely need your assistance later this year when tax extenders and what might be possible comes more into focus. Until then, be well and keep up the good fight.

CHC Member Spotlight

Merritt invests in affordable housing and people to build a stronger California. For more than 30 years we have been a trusted partner, investing more than $1 billion creating over 10,000 affordable homes across California. As a mission-based nonprofit, Merritt strives to improve the affordable housing industry by working to address equity, diversity, and inclusion with other like-minded organizations.

This year Merritt launched our Commitment to California initiative, a $2.5 million commitment to strengthen the future of affordable housing with contributions over the next three years, to educate, train, and support over 800 professionals via scholarships, internships, career development and innovative engagement. "At Merritt we know that solving the affordable housing crisis requires significant investments in the next generation of affordable housing leaders,” said Ari Beliak, CEO and President of Merritt. “We believe these leaders will strengthen and diversify our industry to build a stronger California.”

We are focusing on three areas as part of our Commitment to California initiative:

Merritt Scholars, a program that provides tangible knowledge of the industry for undergraduate students and creates an entry point for a career in affordable housing. This program includes a $10,000 scholarship and a meaningful opportunity to learn more about the affordable housing field via access to a mentor, fully paid attendance at local and statewide industry conferences, and engagement with industry leaders. At the conclusion for the program, Merritt may assist scholars in obtaining their first job in the affordable housing industry. We met our year three goal of increasing this program by 4 times the number of scholars in year one by welcoming 16 scholars to the 2022-2023 Merritt Scholars cohort!

Housing Development Training Institute, a one-of-a-kind training program for project managers at non-profit affordable developers. We partnered with LISC, contributing $750,000 over the next three years. This year’s cohort has 50 affordable housing professionals. “Merritt strongly believes that HDTI is the most consequential program in California for affordable housing development,” states Ari Beliak, Merritt’s CEO and President. “As we invest in the future of California’s affordable housing through our Commitment to California initiative, we are excited to partner with LISC to grow the HDTI program, training more effective leaders in the industry.”

Statewide professional development programs engage people already interested or involved in the affordable housing industry, and to work toward diversity and inclusion in affordable housing. Over 400 individuals will be impacted by these initiatives.

Merritt is happy to partner with organizations to fund programs that are already doing impactful work in affordable housing.

Housing California: Emerging Leader Scholarship Fund
Non-Profit Housing Association: Bay Area Housing Internship Program (BAHIP) & Emerging Leaders Peer Network (ELPN)
California Rural Housing Coalition: CCRH Internship Program and Rural Housing Summit
SCANPH: Project Manager Mentorship Program
San Diego Housing Federation: Community College Program
SV@Home: Affordable Housing Month
California Housing Partnership: Equity Policy Research Fellowship

Merritt strongly believes in investing in California’s future and strengthening the next generation and we are excited to work with other like-minded organizations. Through Merritt’s Commitment to California the future of the state’s affordable housing industry will be more equitable and diverse, which will have positive impacts for all of California.

CHC 2022 Policy Forum

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