Housing California
California Tax Credit Update
William J. Pavão, Executive Director
California Tax Credit Allocation Committee
1
First Round 2011 Update
• 9% applications received: 103 (126 in 2010)
– Likely awards: 54 (37 in first round 2010)
• 4%+State applications: 13 (2 in 2010)
– Likely awards: 9 (8 in three 2010 rounds)
2
9% Requests vs. (Likely Awards)
• Nonprofit:
27 apps. (3)
• Rural:
21 apps. (12)
• At-risk:
4 apps. (2)
• Special Needs/SRO: 7 apps. (2)
3
Geographic – Not Including
Set-aside Cascades
• San Francisco:
3 apps. (1)
• Central Coast:
9 apps. (2)
• Capital Northern:
7 apps. (3)
• South/West Bay:
4 apps. (2)
• Orange County:
8 apps. (3)
4
Geographic – Not Including
Set-aside Cascades
• Inland Empire:
9 apps. (3)
• San Diego:
8 apps. (4)
• North/East Bay:
5 apps. (3)
• Central Valley:
9 apps. (5)
• Los Angeles:
20 apps. (10)
5
Tiebreaker Ranges:
Primarily Self Scores
• Nonprofit:
110.155 – 89.395%
• Rural:
60.016 – 50.048%
• At-risk:
51.928 – 46.620%
• Special Needs/SRO: 98.796 – 89.435%
6
Tiebreaker Ranges: Primarily Self
Scores and Reaching Down
• San Francisco:
82.531%
• Central Coast:
78.857 – 64.504%
• Capital Northern:
73.919 – 66.038%
• South/West Bay:
78.860 – 78.466%
• Orange County:
73.163 – 24.00%
7
Tiebreaker Ranges: Primarily Self
Scores and Reaching Down
• Inland Empire:
76.827 – 73.716%
• San Diego:
85.889 – 77.062%
• North/East Bay:
83.490 – 78.889%
• Central Valley:
89.204 – 65.019%
• Los Angeles:
83.266 – 63.512%
8
State Credits
• $105 million available for 9% applicants in
2011
• Approximately $19 million likely to be
awarded to 9% applicants
• Second round likely to leave surplus for 4%plus-State credit applicants
9
Cost Reasonableness
• Initiating review for possible changes in 2012
• In 2010, seven of 75 projects exceeded
$480K/unit
– Three projects exceeded $500K/unit
– One exceeded $611K/unit
10
Cost Per Unit Trends – 2005-2010
Average Per Unit Costs: 2005-2010
$400,000
Total Development Cost per Unit
$350,000
$300,000
$250,000
All 9% Projects
$200,000
9% New Construction
9% Rehabilitation and Acquisition
$150,000
$100,000
$50,000
$0
2005
2006
2007
2008
2009
2010
Year
11
Preliminary First Round 2011 Data
Average Per Unit Costs: 2005-2011
$400,000
Total Development Cost per Unit
$350,000
$300,000
$250,000
All 9% Projects
$200,000
9% New Construction
9% Acquisition & Rehabilitation
$150,000
$100,000
$50,000
$0
2005
2006
2007
2008
2009
Year
*2011 includes only residential costs and considers potential winners from the First Round.
2010
2011*
12
CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE
Total Federal and State Credits per Unit (9%) 2005-2010
$200,000
$199,334
$193,490
$189,502
$180,000
$186,732
$187,543
2007
2008
Credit
per Unit
$160,000
$155,732
$140,000
$120,000
$100,000
2005
2006
2009
2010
13
CALIFORNIA TAX CREDIT ALLOCATION COMMITTEE
Total Federal and State Credits per Unit (9%) 2005-2011 (Potential Winners)
$200,000
$199,334
$193,490
$186,732
$180,000
$189,502
$187,543
Credit
per Unit
$160,000
$155,732
$140,000
$143,039
$120,000
$100,000
2005
2006
2007
2008
2009
2010
2011*
* 2011 only includes potential winners from the First Round
14
2011 Applications
• Four large family projects with high per unit
costs
– Palo Alto project: $598K/unit
– Two Santa Monica projects: $592K and $595K/unit
– Culver City project: $642K/unit
15
Current Regulations
• “Development and operational costs shall be
reasonable and within limits established by
the Committee, and may be adjusted by the
Committee, at any time prior to issuance of
the tax forms.” (Section 10327(a))
• Committee has system of basis limits and
adjustments
• Regulations limit developer fee and contractor
overhead and profit
16
Regulations cont.
• Currently no expressed limit on total costs
• Scoring on cost efficiency (Section
10325(c)(1)(A)) typically superseded by
leveraged public funds
• What should TCAC’s role be?
17
Starting Process
• Defining the problem: Outliers, or more?
• Working with other State housing partners
• May procure analytical help with cost
components and trends
• May propose regulation changes for 2012
18
Operating Expense Minimums
• Current TCAC practice in underwriting
– Establish averages from existing 3,000 property
portfolio
– Sort by housing type, region, and elevator
presence
– Use average as underwriting minimum
19
2010 Operating Cost Data
• Five years’ worth of data used each year
– Most recent year’s reports added; oldest dropped
off
• Extreme increases in costs, especially for
senior-only projects
• 25+% year-over-year increases in some cases
20
2011 Cost Data cont.
• Senior costs now very close to large family
costs
• TCAC using 2010 tables for this year
• Will publish new data-based table for
information toward 2012 rounds
• Seeking explanations and input
21
Geographic Apportionments
• TCAC’s current regulation apportionments put
in place in 2003
• New census and other data available
• Periodic updating in order
• Memorandum forthcoming
22
Apportionments cont.
• Memo will show results using prior method
• Memo will describe factors and method
• TCAC will propose one decimal-point display
• Will seek stakeholder input and consideration
of other factors
23