Budget Deficit in California Will Lead to Reduced Production of Affordable Housing

By Anuradha Kher, Online News EditorNew York–Even though affordable housing has been one of the priorities of the Department of Housing and Urban Development (HUD), some states are facing challenges when it comes to funding. One such state is California. In the face of immense budget deficit problems, the state has had to cut back on funding for affordable housing.To balance the state budget, the Legislature and the governor are poised to cut $1.7 billion from redevelopment agencies throughout California. For example, L.A.’s agency would lose $72 million and Daly City would lose $1.9 million. “I am very concerned that going forward we will see a dramatic decrease in the number of homes produced due to these diminished local resources,” Laura Archuleta, president of Jamboree Housing, tells MHN. Jamboree and other affordable housing developers in the state of California are feeling the effects of the deficit. “The deficit has caused projects that have received gap financing loan commitments to be unable to convert to their permanent financing and in some cases those that were preparing to begin construction to halt,” says Archuletta.She also says there’s been a shortage of equity to purchase the tax credits. “This is tied to the current financial crisis and as businesses throughout the U.S. have no tax liability, they have no need for tax credits. Therefore, there is much less equity coming into the marketplace. The new federal stimulus program, including the exchange program and the TCAC program, should help developers continue to move their projects forward in this unstable market.” Lydia Tan, interim president and CEO of BRIDGE Housing, is also concerned about the impact of the deficit. “There are several projects on which construction has been stalled due to lack of financing. About 400 affordable units in our portfolio are in this phase.“In addition, California did not have a permanent source of financing for affordable housing and now, due to the deficit, is unlikely to. The next few years are going to be tough and production will be reduced.”Archuleta says, “We hope now that a state budget has been agreed upon, we will start to see project financing start moving through the state of California’s funding process. Other states too will be evaluating how their resources are spent and affordable housing developers need to be prepared to protect their resources in order to ensure their production continues during these difficult economic times.”