The program uses what are called “private activity bonds.” The tax-exempt bonds allow corporations to borrow at the low interest rates available to local governments while providing them a 4 percent tax credit to limit their tax exposure.

They’re commonly used to fund not just affordable housing but hospitals and other public infrastructure as well as private university housing. The California State Treasurer’s Office, which oversees issuance of six versions of the bonds, reported that in 2016, they were used to fund $6 billion in affordable housing projects and to provide $2.2 billion in tax credits tied to use of the bonds, according to the Los Angeles Times. This either preserved or created more than 20,000 affordable housing units.

State Treasurer John Chiang (pictured) was the leading California critic of House Republicans’ move to end the bonds. In November, he told Bond Buyer if they were successful, it would “throw gasoline on the housing shortage” in the Golden State.

While the cut in the corporate tax rate and other pending tax code changes give companies less of an incentive to buy private activity bonds to shield income, the bonds and related tax credits are also made available to developers when they are required to build affordable housing as a condition of approval for other, market-rate housing projects.

That leverage – attaching conditions to project approvals – would have remained had the private activity bonds and related tax credits been scrapped. But affordable housing advocates see the incentives as valuable sweeteners in cutting deals with developers.

Feinstein rips lowering of mortgage interest deductibility

Other changes in the tax bill may end up having the most significant effect on California housing. The National Association of Realtors expects home values to decline by 10 percent or more in high-cost states for two reasons: Because the final version of the GOP bill reduces the deductibility of mortgage interest from the first $1 million of a newly purchased home’s value to the first $750,000 and because it caps the amount of local and state taxes that can be deducted from income for federal tax filers at $10,000. The Realtors group, which opposes the tax bill, said Americans have been well-served by the tax incentives.

On Sunday, California Sen. Dianne Feinstein took to Twitter to rip the lowering of mortgage deductibility limits.

“The Republican tax bill caps the mortgage interest deduction at $750,000 for new mortgages. In California, seven counties have average home prices that are more than $750,000: Alameda, Marin, Orange, San Francisco, San Mateo, Santa Clara and Santa Cruz counties,” she wrote.

The tweet finished with a “GOPTaxScam” hashtag.