Affordable Housing Funding Bill Clears Major Committee

Monday, May 15, 2017

Assemblyman Chiu Bring California home housing initiative reform

AB 71 will provide $300 million annually for affordable housing by eliminating the mortgage interest deduction on second homes

Sacramento, CA–The Assembly Revenue and Taxation Committee today passed Assembly Bill (AB) 71, a measure authored by Assemblymember David Chiu (D – San Francisco) that will create an ongoing, permanent state funding source for affordable housing by eliminating the state mortgage interest deduction on second homes. The bill received aye votes from all seven of the committee’s Democratic members.

“We need to be sure that all Californians have roofs over their heads before we provide tax breaks to help some people with two homes,” said Assemblymember Chiu. “California needs a reliable, permanent funding stream to support production of affordable housing that the market simply will not build. We voted to fix our roads, and now we must help all Californians live in housing they can afford. I appreciate the leadership of Speaker Rendon and the engagement of my colleagues as we work together to make real progress this year.”

“State policies should be targeted toward building more affordable housing, not toward benefiting those privileged enough to own a vacation home,” said Assembly Speaker Anthony Rendon (D-Lakewood). “AB 71 does just that by generating ongoing revenue for housing construction in an economically fair and responsible manner.”

The state mortgage interest deduction for  vacation homes results in a revenue loss to the state of approximately $300 million annually.  AB 71 would redirect those savings into the Low Income Housing Tax Credit (LIHTC) program to build housing that is affordable for low- and moderate-income families.  

State investment in affordable housing has been cut by $1.7 billion a year because of the elimination of redevelopment agencies and the exhaustion of 2006 voter-approved housing bonds. California is the sixth largest economy in the world but after factoring in housing cost it has the highest poverty rate in the nation. Virtually no low-income Californians, who make up 38 percent of the state’s population, can afford their local housing costs.  Nearly 70 percent of low-income and very-low income households spend more than 50 percent of their income on housing costs, according to the McKinsey Global Institute.

The legislature is responding. In the two-year legislative session that began in December, over 100 bills housing-related bills were introduced in the Assembly; another 30 bills originated in the State Senate. These totals are greater than in the entire preceding two-year legislative session. The high volume of bills this year is a testament to the impact of the housing crisis across the state - and demonstrate a commitment to address it.

“Decisions at the state and local levels have worsened the affordability crisis Californians face today and saddled our state with the worst poverty rating in the nation. With their votes, members of the Assembly Tax and Revenue Committee took bold action to say backwards housing policies must be fixed now, and it is unjustifiable to give a $300 million per year tax break for second, vacation homes when families with children, college students, veterans and elderly Californians lack a single roof over their heads,” said California Housing Consortium Executive Director Ray Pearl. “Legislative action is especially crucial coming off the heels of Governor Brown releasing his revised state budget last week that did not include any new investment in affordable housing.”

The LIHTC program is one of the only remaining sources of funding available for affordable housing development in the state, making it competitive and overprescribed.  By eliminating the vacation home mortgage interest deduction and simultaneously increasing the annual state tax credit allocation by $300 million, California could leverage $1 billion dollars in new federal resources and create affordable homes each year for low-income Californians while generating significant job growth.

“The Assembly Revenue and Taxation Committee’s vote to approve AB 71 today brings us one step closer to the creation of more than 3,000 affordable homes and 7,000 new jobs annually by using additional state tax credits to leverage $1 billion dollars in new federal resources,” said Matt Schwartz, President & CEO of California Housing Partnership. “This new investment in an incredibly efficient private-public partnership is a down payment toward helping local communities address the shortfall of more than 1 million affordable homes that are needed to house California’s workforce.”

“The Residents United Network – the only statewide advocacy group made up of affordable housing residents and staff  – and Housing California believe today’s win signals real legislative leadership in beginning to reverse state disinvestment in its people,” said Lisa Hershey, Executive Director of Housing California. “Assemblymembers who support AB 71 know that without stable affordable homes, Californians struggle to make ends meet and save for their futures. Today, more than 3 million California households can’t afford their rent while the state subsidizes vacation homes for fewer than 1 percent of the wealthiest Californians. Assemblymember David Chiu set in motion smart reform with AB 71, and we urge the legislature to support this tool as  a key part of the package of housing solutions.”

Other legislators have signed on to join the effort to advance AB 71 including Assemblymembers Rob Bonta (D-Oakland), Ash Kalra (D-San Jose) as joint authors and Assemblymembers Phil Ting (D-San Francisco), Kevin McCarty (D - Sacramento), and Speaker pro Tem Kevin Mullin (D-San Mateo) as co-authors.

In addition to AB 71’s creation of a permanent funding source for affordable housing, Assemblymember Chiu and his Assembly colleagues are advancing bills to protect immigrant tenants, make it easier for local jurisdictions to vote to fund affordable housing, incentivize local governments to complete upfront planning and environmental review and streamline housing permits to increase housing production, enhance the enforcement of existing state housing laws, and provide rental assistance to homeless Medi-Cal recipients.

AB 71 bill now heads to the Assembly Appropriations Committee.


Assemblymember David Chiu (D – San Francisco) is the Chair of the Housing & Community Development Committee of the California State Assembly. He represents the 17th Assembly District, which encompasses eastern San Francisco.