California streamlines affordable housing funding

California is creating its first standalone housing agency to help streamline funding for affordable housing development — except it has no new money due to proposed state budget cuts.

Starting July 1, the state will create the California Housing and Homelessness Agency to house various departments overseeing state and federal housing funding programs under one umbrella. By doing so, some developers anticipate this will make it easier and cheaper to build homes. Others are worried the consolidation isn’t well thought out and will disrupt existing programs. Creating further uncertainty is the lack of funds in the governor’s proposed budget — which will cause some projects to stall, developers said.

“So we’re creating a framework that is going to be able to administer the money more effectively, but it doesn’t come with the money itself,” Alison Cingolani, director of policy at nonprofit SV@Home, told San José Spotlight. “So this agency is still going to need to be adequately resourced to support the affordable housing development that we need.”

Under the current system, funding for affordable housing is a complicated and lengthy process that requires developers to submit multiple applications across various agencies to cobble together tax credits, bonds, grants, subsidies and more for a project to pencil out. It can take years to gather enough money.

The Terner Center for Housing Innovation at the University of California, Berkeley found each additional funding source delays construction by an average of four months and adds an additional $20,406 per home.

The new agency aims to solve that problem, Christi Economy, senior research associate at the Terner Center, said.

“I think a key component of this (state housing agency) is the potential for a one stop shop for affordable housing finance,” Economy told San José Spotlight. “This is ideally a place where developers can apply and receive funding through a single application process.”

While it’s unclear exactly how this new streamlined process will play out, some nonprofit developers are hopeful it’s a change in the right direction. Others have concerns about how the state housing agency will interact with local dollars.

One proposal being considered would automatically set aside a certain amount of tax credits for projects that receive an award through the new agency. While this can ensure some housing projects can be fully funded, other projects that don’t need state subsidies might have a harder time accessing tax credits, Linda Mandolini, CEO of nonprofit developer Eden Housing, said.

“It’s just not clear yet how those projects are going to get to compete, and I think that’s the question that we’re all having,” Mandolini told San José Spotlight.

Tia Boatman Patterson, former executive director of the California Housing Finance Agency, one of the state agencies that finances affordable housing, said this reorganization is happening without program evaluation and forethought.

Under the California Housing and Homelessness Agency, a new Housing Development and Finance Committee will be formed to oversee funding programs. This includes the Mixed-Income Program, which provides subsidies for affordable multifamily developments such as Gateway Tower, a 15-story, 100% affordable apartment building being built in downtown San Jose’s SoFA District.

The Affordable Housing and Sustainable Communities program will also be overseen by the finance committee. This program subsidizes affordable housing near public transit, such as the 195-apartment affordable housing development being built next to the Berryessa Transit Center, which received a $38 million grant.

Boatman Patterson has raised alarm that the success of these two programs could be jeopardized once they get rolled into the new finance committee. Furthermore, she argues that how a program is designed is more important than where it is housed.

“There’s nothing wrong with that program,” Boatman Patterson told San José Spotlight. “So why would you take a program that is efficiently administered and now move it to a brand new entity so that it can be administered just like your other programs that have never been reviewed or evaluated?”

Nevada Merriman, vice president of policy and advocacy at nonprofit developer MidPen Housing Corporation, anticipates the governmental reorganization could cut the timeline to start construction by up to half. She said over the last five years it’s taken them an average of 2.6 years to find funding to start construction due to the fragmented system.

In the Bay Area where it’s extremely costly to build homes, shaving off months could potentially save thousands, even millions of dollars and make public funds stretch further.

“The creation of a streamlined state system has long been our North Star,” Merriman told San José Spotlight. “I hope the work ahead creates a predictable, well-funded housing finance delivery system. If we can do that, then we will build the pipeline and get to work.”

Contact Joyce Chu at [email protected] or @joyce_speaks on X.