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Tax credits are the spark for affordable housing

June 15, 2003|Diane Wedner

Not long after Congress authorized low-income housing tax credits in 1986, more developers began exploring affordable housing because the program offered a new way to finance projects. A year later, California authorized a tax-credit program that provided an additional incentive.

Since then, developers have used federal and state tax credits and other financing to construct 33,551 affordable units in Los Angeles County, and a total of 70,714 in all six Southern California counties, according to the California Tax Credit Allocation Committee.

By comparison, nearly 1.4 million houses, condominiums, townhomes and apartments were built in the six counties during the same period, according to the Los Angeles County Economic Development Corp.

To secure the tax credits, developers go through a highly competitive and arduous process. They must have, among other things, funding secured from sources that may include the city, nonprofit lenders such as Enterprise Foundation and Century Housing Corp., and conventional banks.

Preference is given to projects that serve the lowest-income tenants for the longest period of time and those that help with community revitalization.

In California, the demand for housing tax credits typically exceeds the supply by 4 to 1.

Developers may sell tax credits to corporations and other investors to raise funds for construction.

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-- Diane Wedner

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