L.A. Fights to Keep Low-Income Housing Credit
Los Angeles officials are mounting a major lobbying effort to preserve a temporary federal tax credit that in just one year has infused millions of dollars into desperately needed low-income housing in the city.
Developers and nonprofit groups have built or are planning to construct nearly 1,000 low-rent apartments in Los Angeles because of the tax credit and a similar state credit, which grant a generous tax savings to for-profit companies that invest money in low-rent housing. However, the federal credit is set to expire at the end of next year, leaving scores of proposed ventures up in the air.
A bill to extend the increasingly popular tax credit has been sponsored by Sens. George J. Mitchell (D-Maine), John C. Danforth (R-Mo.), Alan Cranston (D-Calif.) and more than 20 others. The bill would extend the tax credit by one year while Cranston and others work on a comprehensive new housing package that may make the tax credit permanent or offer alternatives.
However, with Congress’ summer recess around the corner and the presidential campaign dominating the agenda thereafter, many officials fear that the program may not be acted upon in time to save scores of low-income projects.
“This is the only new federal housing program in the country,” said Gary Squier, Mayor Tom Bradley’s housing coordinator. “It’s cumbersome, but it’s all we’ve got and we can’t afford to lose it.”
Happy Chastain, executive director of the state Treasurer’s Mortgage Bond Tax Credit Allocation Committee, which approves California applicants seeking the benefits of the tax credit, said the expiration in 1989 “would be a disaster” for cities with pressing urban housing shortages.
Chastain said the credit “is pretty much the only thing happening in low-income construction in California, the only incentive for developers, and we are really concerned.”
Rents of $450
The companies that receive tax breaks are not the only ones who benefit: Under the tax rules, families are assured of very low rents--about $450 for a family of four in Los Angeles.
Don Campbell, staff director of the Senate housing subcommittee, said Los Angeles city officials have heavily lobbied for the bill. However, he said, “it’s just impossible to say whether it will move through the Finance Committee, which is going to consider it. It’s funny, but sometimes you get these bills that have all kinds of support, but for one reason or another they just die.”
Proponents, including Bradley, say the credit must be extended by Congress immediately if scores of proposed low-income apartment buildings that would not come on line until late 1989 or early 1990 are to be saved.
“This is a badly needed and welcome program that has a lot of potential,” said Ralph Esparsa of the city’s Community Development Department. “The tax credit was authorized by tax reform in 1986, but it didn’t get fully rolling in 1987, so you haven’t seen the full thrust of it yet.”
Anita Landecker, California director of an institution that has persuaded several Los Angeles corporations to take advantage of the credit by backing nonprofit housing developers, said her group will have to stop its work if Congress does not act soon.
She said that without the corporate funds generated by her group, the Local Initiatives Support Corp., about 300 new or renovated apartments now under way likely would not have been built.
For instance, construction began last week on six small apartments on Westlake Avenue, east of downtown, that are being developed by the Los Angeles Community Design Center and El Pueblo Community Development Corp., two nonprofit groups that will own and manage the buildings.
But if LISC had not been able to offer tax credits to corporations “as the carrot” for investing in the project, Landecker said, it would not have moved forward.
“We cannot keep raising money and getting nonprofit groups excited about building housing, knowing the apartments we are talking about wouldn’t come on line until 1990, when this program may not even exist,” she said.
City officials are particularly concerned about the program’s uncertain future because of the massive cuts in housing programs by the Reagan Administration since 1980.
According to officials of the Community Development Department and Community Redevelopment Agency, the city has created 6,600 low-income dwelling units in the past eight years without the tax credit program, but demand has far outstripped the supply.
Recently, the mayor has thrown his support behind LISC, which is successfully encouraging tiny, nonprofit community organizations to develop low-income housing.
LISC, which was created by the Ford Foundation, tries to match money raised from large corporations with equal amounts of city funds and private mortgage loans. Using this formula, the group raised enough money last year--including $4 million from corporations alone--to fund several local nonprofit groups that built or renovated 300 low-income units.
Chastain, of the Mortgage Bond Tax Credit Allocation Committee, said the state allows companies a 30% tax credit on every dollar spent on low-income housing units, and the federal government allows a 9% tax credit.
Companies such as Atlantic Richfield, J.C. Penney Co. and Great Western Financial Corp. have invested in the LISC pool and are expected to reap a significant tax saving. LISC estimates that a tax saving of $1.5 million will be realized over 15 years on a typical investment of $1 million.
Important Thing
Sharon Butler, director of community development at Great Western, said her company got involved last year because “it’s one of the few ways that we can help add to the pool of affordable housing nationwide and in California.” Butler said that while the bank views its involvement partly as a financial investment, “our decision really came down to the fact that we feel this is an important thing to do.”
Landecker, of LISC, said her group is well on its way to raising $10 million from Los Angeles corporations this year, thanks in part to the mayor, who is hosting breakfast sessions with companies interested in the tax credit. The $10 million will be matched with city funds and private loans to build 500 units, providing homes to 2,000 people, she said.
“Corporations are actually starting to call us, and it’s growing by leaps and bounds,” Landecker said. “This tax credit makes everybody look good on the charitable side and on the financial side. I hate to think that will all end just because nobody in Washington really cared.”
