Can Trump’s ‘Big Beautiful Bill’ help California meet affordable housing goals?

This article was produced by Capital Main It is published here with permission California s housing shortage has been at situation level for decades Three years ago its Department of Housing and Society Growth mentioned the state must plan for million new homes in the eight-year cycle between and more than double the total of the previous eight years Further the statement declared at least a million of those homes must meet the requirements of lower income households That s a tall ask in the current environment in which President Donald Trump s actions have exacerbated certain of the problems tariffs on core building components such as iron and steel threats to immigrant workers that have thinned the construction industry s labor force and policy-driven inflation that has made the Federal Reserve wary of lowering interest rates thus keeping the cost of borrowing money high State leaders therefore could be forgiven if they were nonplussed by the Trump administration s latest suggestion that the president may declare a national housing urgency this fall The teaser dropped by Treasury Secretary Scott Bessent in interviews with the Washington Examiner and Reuters was accompanied by no details about what such a declaration might achieve or what it even means In his seven-plus months back in office Trump has declared nine national emergencies plus a crime crisis in Washington D C This one would concern a housing arena in a deep funk but aside from acknowledging it Bessent didn t specify any actions Trump would take Yet somewhere in the rubble of the Trump administration s approach to these issues a nugget of guidelines has emerged that might improve a critical component of the housing region in California and elsewhere It isn t a perfect cure and it has its limits but its likely is real enough Tucked within the so-called One Big Beautiful Bill is a provision that significantly expands the Low-Income Housing Tax Credit a effort the U S Department of Housing and Urban Evolution describes as the majority of critical asset for creating affordable housing in the United States in the present day The tax credit operation is not universally beloved with certain groups arguing that it rewards developers and investors more than housing-insecure families But it performs a transactional function Essentially the activity gives substantial federal tax credits to developers if they build or rehabilitate housing that sets aside a certain percentage of units for low-income renters chosen of the construction cost which can be written off their tax bill each year for years Large apartment buildings qualify for the credit but so do smaller projects such as duplexes and fourplexes as well as single family homes The developers can use the tax credits themselves but often they sell them to banks and other equity investors in exchange for the money to kick-start the projects Until now the operation which was created by the Tax Transformation Act of has funneled billion a year to states and local agencies which then awarded the tax credits to developers based on bids Trump s spending bill substantially increases the total number of those credits available to states each year and it does so indefinitely The bill also makes it easier for developers to qualify for a separate tax credit as it cuts from to the amount of housing costs that must be paid for by tax-exempt bonds The upshot is that developers in California will qualify for vastly more tax credits theoretically fueling greater affordable housing construction The passage of the One Big Ugly Bill in July with all of its horrendous impacts on the nation s social safety net had a little-known silver lining for California Matt Schwartz president and CEO of the nonprofit California Housing Partnership narrated Capital Main Schwartz revealed that if California matches the federal funding increase by passing a new affordable housing bond in and establishes long-term funding by the state could nearly double its production of affordable housing to certain new units per year a total that would make a sizable dent in its larger goal But that depends on such a bond being approved by voters It s fair to assume that Trump didn t enhance the tax credit venture in order to ease the burden on low-income Americans Consider his administration s assault on Medicaid an estimated billion funding reduction in low-income medical care programs that the Republican-controlled Congress approved in the spending bill Rather the left-leaning Center for Economic and Agenda Research suggested the housing tax credit changes primarily lock in tax breaks for investors such as banks and insurance companies which buy the credits from developers The center contended that the measures don t offer real relief to those facing housing insecurity and skyrocketing rents It is also true that these affordable housing projects in California and elsewhere in fact require that only a certain portion of a progress be set aside for low-income renters That s nothing new Such requirements often have a shelf life of as little as years after which developers are free to pursue industry rates on those units But in a housing-desperate state like California this may qualify as any port in a storm territory In a Los Angeles Times analysis of state information detected that the cost of building affordable housing had soared to absurd heights in specific cases million per apartment The state has failed for decades to meaningfully boost its housing stock and particularly to increase the number of affordable units available Improving federal enticements to developers and the financiers to whom they sell their tax credits is no perfect fix But it might prove to be an essential piece of the puzzle Capital Main is an award-winning nonprofit publication that reports from California on the majority pressing economic environmental and social issues of our time including economic inequality state change medical care 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