Mark Stivers
Executive director, California Tax Credit Allocation Committee
What’s the biggest change you’ve made to the 2015 qualified allocation plan (QAP), and why?
Treasurer John Chiang and his housing team took office in January 2015 and are currently reviewing California’s QAP with the goal of increasing the production of affordable housing while maximizing affordability. As a result of this change in leadership, the changes to California’s QAP for 2015 were relatively minor. Nonetheless, TCAC altered its QAP to:
- Include the state’s Veteran’s Housing and Homeless Prevention Program on the list of priority homeless assistance projects within the nonprofit set-aside.
- Apply the 15% senior housing goal within the rural set-aside.
- Allow higher early year cash flow if necessary for a 15th year positive cash flow.
- For purposes of meeting energy efficiency goals, permit new construction projects to achieve set percentages of a zero net energy standard and rehabilitation projects to count certain recent energy-efficiency improvements.
What trends are you seeing in your 9% and/or 4% credit low-income housing tax credit (LIHTC) programs?
California continues to see very strong pricing for federal credits, particularly in Community Reinvestment Act territories. Pricing averaged $1.04 across the entire portfolio of 2014 9% deals, with five projects receiving $1.15 or more.
Resyndications are also growing. In 2014, TCAC awarded credits to 33 resyndication projects, up from 26 awards in 2013. Nine of the 33 awards were 9% credit awards.
AB 952, enacted in 2013, permits TCAC to allocate state credits to special needs projects in Difficult Development Areas (DDAs). Coupled with a TCAC regulation change to designate all special needs housing as DDA projects, this allows such projects to get the 130% federal basis boost and access state credits. As a result, the volume of applications for 9% credits for special-needs projects increased significantly in 2014.
What strategies are you implementing to preserve existing affordable housing?
Given California’s extreme housing shortage, our priority in the 9% program is new construction. Nonetheless, preserving existing affordable housing through the 4% program, and the 9% program when necessary, is very important. Treasurer Chiang is supporting legislation, AB 35, to increase the amount of state tax credits by $300 million annually to help fill gaps on 4% projects, which will make 4% preservation projects more feasible. This bill also proposes a 95% state credit on rehabilitation costs for projects that have high needs but minimal acquisition value to help fund repairs.
What is your agency doing to address cost containment?
Addressing costs is a very challenging task in California where land costs are high and construction costs keep rising in booming employment markets. Nonetheless, TCAC recently adopted a policy whereby staff would not recommend a project for 9% credits if the total eligible basis exceeded 130% of the total adjusted threshold basis limits. To date, no application has exceeded that threshold.
As mentioned above, TCAC is currently reviewing its QAP with an eye toward how to contain costs further in order to increase production. Under consideration are ideas to: 1) relax minimum construction standards; 2) lower amenity thresholds; 3) expand the geographic definition for scattered-site projects; 4) incentivize reduced parking requirements; and 5) create greater cost-efficiency incentives through the tiebreaker and or the threshold scoring criteria. However, TCAC must also balance this goal with ensuring geographic equity and the competitiveness of special needs projects.
What advice do you have for developers applying for LIHTCs and/or other financing in your state? What’s a common mistake developers make when applying for funding?
California has very sophisticated development entities. As a result, we see few mistakes. In each round, however, we do reduce point and tiebreaker scores due to creative interpretations of our regulations. TCAC appreciates when developers raise interpretation questions with us prior to the application deadline so that projects enter the competition with a common understanding.
In addition, developers sometimes submit lengthy documents in an application without clearly explaining how the documents serve to meet a particular scoring or application requirement. Concise submittals that clearly respond to the requirement save time for both TCAC and the developer.
