After years of struggle, Merritt celebrates Paradise Community Village for overcoming a major hurdle that threatened its viability – costly IRS penalties. This win comes from recent COVID legislation and support from the California Tax Credit Allocation Committee.
Paradise Community Village, developed by CHIP (Community Housing Improvement Program) Housing with an investment from Merritt Community Capital, was lost in the 2018 Camp Fire along with much of the town of Paradise. Paradise Village was the only affordable multifamily project in the town, representing an important resource for the community.
As rebuilding of the 36-unit project for low-income families got underway in October of 2020 the excitement was clouded by the potential of recapture from the IRS of a portion of the project’s Low Income Housing Tax Credits (LIHTC). Recapture, which could increase rebuilding costs by millions of dollars, would be triggered if construction were not complete within 25 months, an impossible deadline given the complete devastation of the Camp Fire. An initial request for extension was supported by advocacy efforts and bi-partisan support from CHIP’s partners, but the initial request was denied on the anniversary of the fire.
After many months of lobbying organized by CHIP Housing’s President/CEO, Seana O’Shaughnessy, with active engagement from Merritt and many allies in the affordable housing industry, the COVID-19 relief legislation that passed at the end of 2020 included a provision to extend the recapture deadline. More specifically, the legislation extended deadlines after April 1, 2020 for an additional year provided the state allocating agency approved it. In Paradise Village’s case, the original deadline was December 31, 2020 and TCAC has approved extending that deadline to December 31, 2021.
As CHIP’s Limited Partner, Merritt was faced with the decision early on to either stand with CHIP as a partner and assume financial risk or to avoid losses no matter the consequences to the project or to CHIP. This was an easy decision for Merritt, who quickly committed to the reconstruction of Paradise Community Village and to preserving the viability of CHIP Housing an essential mission-based non-profit affordable housing provider in the region, while accepting the potential of millions of dollars in losses.
Thanks to the dedication of CHIP and their partners, Paradise Village, is already 50% complete and will easily meet this deadline. We here at Merritt look forward to celebrating the grand reopening with CHIP and the community of Paradise later this year.
About Merritt Community Capital Corporation
Merritt Community Capital Corporation is a nonprofit dedicated to our mission to provide equity capital for affordable housing exclusively to California. We do this by partnering with mission-aligned affordable housing developers throughout the state to ensure the most critical communities are developed and maintained for low-income residents. Since 1989, Merritt has created and/or preserved more than 9,000 affordable homes, through investing $950 million in 22 separate funds, providing housing for nearly 25,000 people. To learn more, visit www.merrittcap.org.