Investment Shortage, Foreclosures Threaten California Affordable Housing

by on Foreclosures, States

The building of affordable housing for people with low income in San Diego County are affected by the increase in California foreclosures and lack of tax credit investments.

A long list of low-income families, including owners of foreclosed homes, has been waiting for subsidized housing. In San Diego County, an estimated 26 proposed affordable housing projects representing over 2,000 houses have been postponed.

Meanwhile, construction of nearly 32,000 units in California have stalled because of the lack of investments and increased in the number of distressed properties.

Besides foreclosures, another issue that threatens the affordable housing market is federal tax credit. This investor-funded credit has been providing affordable-housing financing to low-income housing developers. An estimated 11,000 affordable houses backed by federal tax credits have been constructed in San Diego County alone.

These tax credits are allocated on competitive basis to developers. Developers who gave tax credits must then find investors who are willing to buy them. Private investors who want to invest in affordable housing projects are provided with credits in their tax liability.

However, because of the financial hardships being experienced by companies, most developers find it difficult to entice investors to fund their affordable housing projects.

Currently, San Diego County has 26 affordable housing projects that have about $350 million funding. However, according to San Diego Housing Federation, an organization of housing advocates and affordable developers, in order for the market to move forward, another $150 million is needed which in the past could be met by tax-credit equity.

Tax credit declined to 4.5 billion in 2008 from $9 billion in 2007.

If plans will push through, an estimated 32,000 low-income houses could be constructed in 2009 which could create about 37,000 in California.

The possible loss of affordable housing in California is an example of the effect of the weakening economy in the country and the increased in foreclosures. And as long as the issue of foreclosure will not be resolved, the housing market will continue to be besieged with problems which will further delay economic recovery.