SCANPH Response to May Revise and Joint Legislature Budgets
Governor Newsom released the May Revise budget on the 13th of last month and the State Legislature released its joint budget proposal last week. Despite the state’s forecasted budget surplus doubling between January and May to a record-high $97.5 billion, there is not a significant increase in funding dedicated to housing and homelessness between this version of the Governor’s budget and the previous draft released in January. There is also room for improvement for housing funding in the Legislature’s draft.
As with our response to the January budget, SCANPH applauds the governor’s funding for the Infill Infrastructure Grant (IIG) Program ($225 million in 2022) and the Affordable Housing Sustainable Communities (AHSC) Program—both of which fund solutions to the housing and climate crises simultaneously. We also value the continuance of funding for Project Homekey ($1.3 billion) and No Place Like Home ($400 million dollars, matching last year).
Regrettably, we are disappointed in only very minor increases in funding for several key programs. As examples, LIHTC was bumped up less than $40 million and AHSC increased just $18 million. The housing budget overall increased by only 1.3%. With a historic budget surplus nearing the $100 billion mark, this is a lost opportunity to make a real impact on the top problem for Californians – housing affordability. Worse yet, at a time when construction costs and inflation are on the rise, these small increases in reality mean a decrease in state funding support.
On homelessness, SCANPH recognizes how our current, pressing crisis has encouraged this administration to ask for $1.5 billion in various short-term responses, including encampment resolutions and bridge housing. The $9.3 billion in funding for homelessness reflects those priorities, with two new additions in the May Revise: $500 million going to interim housing solutions and a new $400 million fund being dedicated to an “Incompetent to Stand Trial” fund, which will prevent those with mental illnesses from unnecessarily entering the justice system. While we hope for beneficial results from these investments, as the representatives of the providers and developers of Southern California’s affordable housing, our organization will always advocate primarily for the construction of long-term, supportive housing for our unhoused neighbors over short-term solutions.
Unfortunately, we feel that the Legislature’s proposal – the joint budget released by both houses of the California Legislature last week – also has significant room for improvement. We applaud the Legislature for allocating $200 million to the Community Anti-Displacement Acquisition Program, which will bring much needed funding to support the acquisition of unsubsidized affordable housing by non-profit developers. However, with Proposition One bond funds dwindling over the next two years, SCANPH’s primary request was that the legislature advocate for more funding for key affordable housing programs such as the Multifamily Housing Program (MHP). The legislature’s version allocated just $400 million over two years to MHP.
With MHP’s 2020 NOFA set to $195 million and 2021’s releasing $220 million, this $400 million will not last long, and is particularly frustrating considering the size of the state’s current surplus. To add some more perspective, the total requested funds for projects applying to the $220 million MHP NOFA of 2021 was $982 million. While the legislature offers $300 million in Housing Accelerator funds, this amount is also small when compared to the 14,000 shovel-ready projects which await Low-Income Housing Tax Credits in our state.
Ultimately, these planned allocations from the Governor and Legislature are troubling not only because of their low dollar amounts, but because they continue to introduce irregularity to affordable housing financing. With our non-profit members operating at such narrow margins, it is essential that these developers know they can rely on a steady stream of public funds. In other words, tepid funding now not only means fewer affordable housing developments built over the next few years, but a reduced pipeline going forward beyond that.
As a state that values building affordable housing, we need to keep the momentum going and lay the groundwork for the years to come. We call on the Legislature and Governor to take bold action on MHP in particular by allocating $5 billion to the program before the budget is finalized on June 15th, which will show our members that they can be sure this program will be available to them for the foreseeable future.
State Advocacy Update
Since December of last year, inflation has skyrocketed, which has impacted many affordable housing projects that are in the financing stage. Some of our members have reported estimated construction cost increases of up to 38% in just a span of four months.
Because of this, SCANPH has been working with the California Debt Limit Allocation Committee (CDLAC) and the California Tax Credit Allocation (TCAC) committee over the past month to request deadline extensions for projects which received allocations in December of 2021. Normally, these deals would have been forced to return their allocations if they could not demonstrate their readiness to proceed by June of 2022.
CDLAC and TCAC have heeded the requests of SCANPH and our state partners, offering a blanket 90-day extension for Round 2 of 2021’s deals, creating a process for projects to obtain supplemental allocations, and offering the option for developers to return allocations without punitive measures from the committees.
SCANPH is particularly thankful to CDLAC and TCAC staff for calling extra meetings to agendize these requests and ensure that these projects can continue despite these turbulent economic times.