CHC Industry Insight

Industry Insight - January 2022

Note from the Executive Director

It was budget week this week in Sacramento, the unofficial start of the legislative session—and the beginning of the months-long negotiation between the Governor and Legislature that leads to the adoption of the budget in June.

This year’s presentation by Governor Newsom can be looked at two ways.

First, with the state projecting a $45-plus billion surplus—and with the Governor once again putting housing and homelessness at the top of his agenda—it’s certainly fair to view his proposed $2 billion for addressing homelessness and $1 billion for “downtown-oriented” housing development as just a first step, but one that won’t be adequate to meet the scale of either challenge.

There has been some disappointment about these proposals, but I think there is another way to view the Governor’s budget, along with the rest of the legislative session that’s about to get underway.

It is never a bad thing when the Governor makes your issue his own, and with this new budget—and with a renewed election-year emphasis on climate change, preventing wildfires, and promoting sustainable growth—he has certainly done that.

Between last year and this year, the Governor plans to spend $37 billion on actions he views as essential to fighting the climate crisis. The good news is, he has made affordable housing in infill areas—one of the things CHC and our members fight for every day—one of the centerpieces of this campaign. As I told the Los Angeles Times this week: “When the governor of your state says this is your priority, people listen.”

They are definitely listening now, as the governor shares his vision up and down the state of a future of decarbonized buildings, zero-emissions vehicles, and affordable housing close to jobs, schools, transit, and other daily destinations.

Will there be a role for CHC to play highlighting what it will take to make all of this new-and-improved climate-friendly housing a reality? Of course. And we’re already doing that, reminding legislators of the importance of the Governor’s proposed $500 million investment in the Low Income Housing Tax Credit—and the need to provide even more expansive, targeted funding to the Multifamily Housing Program and the California Housing Accelerator to ensure affordable development continues in every community.

It’s an election year, and our issue is now at the top of everyone’s list. As prospects for a state housing bond fade, we have a story to tell about how big the gaps are and where the state needs to invest—and you can be sure we’ll be telling it. With huge turnover coming soon to the Legislature (more on that below), there will be no shortage of people in the Capitol who need to hear it.

As always, with your help—and with the backing of a Governor who believes in the work we do—I know we can make our case. I look forward to it.

Sincerely,

Ray Pearl

Executive Director

In Case You Missed It

On Monday morning, Governor Newsom unveiled his January budget proposal, which includes investments in affordable housing production and addressing homelessness. Key housing proposals in the Governor’s January budget include:
$2 billion to house vulnerable homeless populations with complex behavioral health conditions
$1 billion in one-time funds to accelerate affordable development in downtown areas, including:
$500 million for the Infill Infrastructure Grant Program
$300 million for the Affordable Housing and Sustainable Communities Program
Two new $100 million investments in state excess site development and adaptive reuse incentive grants
$500 million for the state Low Income Housing Tax Credit
Read Ray Pearl's statement on the budget here.
Assemblymember Buffy Wicks (D-Oakland) was named chair of the Assembly Committee on Housing and Community Development, succeeding former Asm. David Chiu (D-San Francisco), who recently left the Legislature to serve as San Francisco City Attorney. “Asm. Wicks’ policy experiences, at many levels, inside and outside of government have been invaluable on the Housing Committee under its previous chair,” Speaker of the Assembly Anthony Rendon said in a statement. “She has the know-how to keep this committee working at the forefront of housing policy. We must keep California focused on this issue and she can do it.”
CalMatters offered a preview of legislative leaders’ priorities—with Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins saying they plan to see through affordable housing and homelessness investments made last year, especially in light of the state’s projected $31 billion surplus. “Those at the top are doing better than ever before, and that’s good for California in terms of our revenue,” Atkins told CalMatters. “But as strong as the economy is, we face a homelessness crisis that you see every day in every corner of the state. And we know how hard it is for everyday, ordinary families to get by.” Rendon says he has asked incoming Assembly Housing Committee chair Buffy Wicks to review the state’s programs on housing, rent relief, and homelessness—to identify what’s working, what’s not, and why.

Affordable Housing in the News

They’re calling it “The Great Resignation.” This month in affordable housing news has seen a wave of stories about the large numbers of state lawmakers—well over a dozen at last count—who have announced their departures from the Legislature, due to a combination of term limits, newly redrawn districts, and opportunities outside Sacramento. Among the names are some of the Capitol’s most influential policymakers, including Lorena Gonzalez (D-San Diego), chair of the Assembly Appropriations Committee, who will take over as head of the California Labor Federation, and former housing committee chair David Chiu (D-San Francisco), now serving as San Francisco City Attorney.

Other members not seeking reelection or looking at new opportunities include: Richard Bloom (D-Santa Monica), who is running for the Los Angeles Board of Supervisors. Running for Congress are Sydney Kamlager (D-Los Angeles), Kevin Kiley (R-Rocklin), Kevin Mullin (D-South San Francisco), and Rudy Salas (D-Bakersfield). Marc Levine (D-Greenbrae) is running for insurance commissioner. Jim Frazier (D-Oakley) is resigning to work in the transportation sector. Bill Quirk (D-Hayward) won’t run again in 2022; same goes for Andreas Borgeas (R-Fresno), Jordan Cunningham (R-San Luis Obispo), Connie Leyva (D-Chino), Chad Mayes (I-Coachella Valley), Jose Medina (D-Riverside), and Patrick O’Donnell (D-Long Beach).

Several former Assemblymembers have been appointed to other posts in the last year: Rob Bonta is now serving as Attorney General, Shirley Weber as Secretary of State, and Ed Chau was recently appointed to serve as a Los Angeles County Superior Court judge.

Federal Update from David Gasson, Boston Capitol

As we begin the New Year the work from 2021 continues as we await further negotiations on the Build Back Better Act (BBB) and the FY 2022 budget. Nothing is certain in the current political and economic environment, especially with COVID continuing to affect all aspects of the economy.

On BBB we do not believe they are any closer to reaching a compromise with Senator Manchin as the focus of the Senate and White House turned to voting rights. Once the voting rights debate assuages, substantive negotiations on BBB will resume with a focus on trimming provisions in the bill and making it more palatable to our friend from West Virginia. We are cautiously watching this process to safeguard our $11 billion in LIHTC resources and the larger affordable housing allocation for HUD and USDA. It is anyone’s guess on how this process will proceed and as I have said on numerous occasions, nothing is certain in Washington until the President signs the legislation. We are confident in the support that exists for the LIHTC and have been working on a Plan B in case BBB does collapse or housing is jettisoned from the package.

Plan B would center on an omnibus that would include the FY 2022 budget and an accompanying tax package. Unlike the work on BBB, this would be a bipartisan process so Republican support for the LIHTC will be vital. It is our hope the tax package would include more than expiring tax provisions, although extenders could absolutely include the 12.5% allocation increase that end on 12/31/2021. A larger package could include the 50% test reduction, our basis boost provisions and potentially some other AHCIA provisions that had support from both parties on both sides of the Hill. Thus, our constant push for bipartisan advocacy which has been the key to our successes over the years.

We also continue to work on regulatory relief from the IRS. The Service just recently released guidance on COVID PIS deadlines which, while we had hoped to have before the end of the year, do include extension of critical deadlines. Based on conversations with the Service and Administration staff, we hope to soon have guidance on the Average Income Test, which is the final set of items on the Services “watch list.”

Treasury also recently released their Final Rule on uses of State and Local Federal Relief Funds. A number of states as well as the industry had requested relief from the rule covering the awarding of grants for affordable housing production with the LIHTC, specifically for-profits. Despite requests from stake holders, Treasury left in place the rule requiring a reduction of basis for any grants issued to for-profits for the production of housing utilizing the LIHTC. We are working with Hill and Administration advocates to reverse this ruling.

So, as you can see there is much work to be done. I so appreciate all the efforts of CHC and our many colleagues across the country as we endeavor to increase affordable housing resources at every level. Thank you and have a happy and healthy 2022.