A building in Hollywood in May 2016. The tax proposals in Congress would make it more difficult for developers to finance affordable rental housing.

Good morning.

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Today’s introduction comes from Conor Dougherty, a reporter based in the Bay Area.

The Republican tax bill making its way through Congress will hit California taxpayers harder than much of the country. It is also very likely to make the state’s housing crisis worse — particularly for lower-income residents.

Among the many threatened tax breaks are provisions that fund affordable housing. The details vary between House and Senate versions of the bill, but the final result — assuming tax reform is passed and signed by President Trump — is quite likely to make affordable rental housing harder to build and finance.

That would affect every state, of course, but a slowdown in affordable housing construction would be particularly brutal for California, which has a huge homeless problem and a $500,000 median home price that is more than twice the national level.

“Affordable housing” is a frequently misunderstood term. While many people use it as shorthand for anything that seems affordable on a typical salary in their area, it refers to subsidized units that are set aside for a city’s lower-income residents. Beyond cheap rent, these developments offer things like flu shots, job training and discounted internet that keep people employable and help them move up in the work force.

To build these units, nonprofit developers use a mix of bonds and tax credits that offset the cost of construction and allow them to offer lower rents for tenants. A little more than half of subsidized developments are financed with tax-free private activity bonds. They also get money from tax credits that developers transfer to corporations, which then use the credits to lower their taxes.

The House version of the bill eliminates private activity bonds, which would reduce the supply of new affordable housing by close to 1 million units, one-third of those in California, according to an analysis by Novogradac & Company, a national accounting firm based in San Francisco. It also reduces the value of investing in low-income housing tax credits.

The Senate version of the tax bill is less extreme: It leaves private activity bonds intact but reduces the value of low-income tax credits.

“The House bill would drastically reduce the future supply of affordable housing, whereas the Senate bill would only damage it,” said Michael Novogradac, managing partner of Novogradac & Company.

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Sam Moss, an affordable-housing developer, in front of a San Francisco lot on which his organization is waiting to build.

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