Unanimous Bipartisan Support For Legislation that would address concerns from the 2017 federal tax overhaul and build on Governor Newsom’s call for California to direct investments in low income census tracts
(From Press Release) – Yesterday, the Assembly Revenue and Taxation Committee voted unanimously to advance legislation by Assemblymember Jesse Gabriel (D – San Fernando Valley) that would provide a major new incentive for the production and preservation of affordable housing in low income census tracts known as “Opportunity Zones.” The legislation—Assembly Bill (AB) 791—would provide $200 million in new tax credits for the construction of affordable housing in Opportunity Zones, and $100 million in new tax credits to preserve affordable housing stock in Opportunity Zones.
“We have a unique opportunity to dramatically increase private investment in some of California’s most economically distressed communities,” said Assemblymember Gabriel. “But without action by the state, there is no guarantee that new investments will benefit low income communities or the broader public. Our legislation would direct new capital into affordable housing and help ensure that Opportunity Zones are part of the solution to California’s housing crisis.”
Opportunity Zones were created as part of the 2017 federal tax overhaul, and offer significant tax benefits to individuals and businesses that invest in specially-designated low income census tracts. California has designated 879 Opportunity Zones across the state that are poised to benefit from billions of dollars in new private investment. However, there are growing concerns that there are not enough protections in the federal legislation to ensure these investments yield any public benefit, and some critics have argued that Opportunity Zones may actually discourage affordable housing production and lead to the displacement of low income residents from communities they have long called home. AB 791 seeks to address these concerns and provide a national model for how states can incentivize investments that will yield the greatest public benefit. Governor Newsom’s proposed budget also recognizes the need for California to provide new tax incentives to help direct investments in Opportunity Zones.
AB 791 is supported by a coalition of leading affordable housing and economic development organizations, including the California Housing Consortium, BRIDGE Housing, and the East Bay Asian Local Development Corporation.
“California has a golden opportunity to enable federal Opportunity Zones to help our lower income communities and not harm them,” said Matt Schwartz, President and CEO of the California Housing Partnership. “AB 791 provides the critical financing tools that will incentivize program participants to invest their time and money in creating and preserving affordable housing and to steer them away from the type of speculative activity that could otherwise lead to accelerated displacement.”
“We must ensure that the economic growth promised by Federal Opportunity Zones benefits long-time, low income residents,” added Joshua Simon, Executive Director of the East Bay Asian Local Development Corporation. “AB 791 will address this by giving tools to nonprofit organizations to fight for and with seniors, educators, first responders and the many others who might otherwise be displaced by economic development in Opportunity Zones.”
“The Opportunity Zone proposal in AB 791 by Assemblymember Jesse Gabriel can help build more affordable housing and protect low-income families,” said Cynthia Parker, President and CEO of BRIDGE Housing. “Opportunity Zones allow for a new type of investor or a new capital source for the Affordable Housing sector – High Net Worth Individuals and Corporations. Since its inception, the Low Income Housing Tax Credit program has mainly attracted banks as the credits’ primary purchasers– attracted both by the tax credit and also helping fulfill their CRA obligations. However, because of the of the significant tax savings gained through Opportunity Zone investment, especially for investors at the highest tax brackets, affordable housing projects can suddenly become a viable investment vehicle.”
AB 791 is expected to be heard in the Assembly Appropriations committee in the next two weeks.