2019-20 Budget – Considerations for the Governor’s Housing Plan

LAO : The Legislative Analyst’s Office
The California Legislature’s Nonpartisan Fiscal and Policy Advisor

Summary

Housing in California has long been more expensive than most of the rest of the country. Addressing California’s housing crisis is one of the most difficult challenges facing the state. The 2019-20 Governor’s budget includes various proposals aimed at improving the affordability of housing in the state. Specifically, the Governor proposes (1) providing planning and production grants to local governments, (2) expanding the state Low-Income Housing Tax Credit program, (3) establishing a new state housing tax credit program targeting relatively higher-income households, and (4) expanding a loan program for middle-income housing production. The Governor’s housing proposals raise questions about which populations to prioritize. The Legislature will need to decide if it agrees with the Governor’s approach to spread the state’s housing resources among broader income levels—including middle-income households—or whether it prefers to target the state’s resources toward the Californians most in need of housing assistance. Because the need for housing assistance outstrips current resources and there are fewer policy options to address affordability for low-income households, we suggest the Legislature consider prioritizing General Fund resources towards programs that assist low-income households. Given that the Governor’s proposals are largely conceptual at this stage, we highlight key questions the Legislature might want to ask the administration as it considers the merits of the proposals, including: (1) the timeline for awarding new affordable housing funding, (2) plans to fund future maintenance costs associated with affordable housing developments, and (3) the state’s approach for administering the newly proposed state housing tax credit program. Lastly, we note that the enormity of California’s housing challenges suggest that policy makers explore a variety of solutions. While the Governor proposes a few approaches to address the state’s high housing costs, the Legislature could pursue a variety of other tactics that address these and/or other facets of the state’s housing crisis.

Conclusion

Addressing California’s housing crisis is one of the most difficult challenges facing the state’s policy makers. Millions of Californians struggle to find housing that is both affordable and suits their needs. The crisis also is a long time in the making, the culmination of decades of shortfalls in housing construction. And just as the crisis has taken decades to develop, it will take many years or decades to correct.

In light of the state’s housing crisis, the Governor’s interest in investing state resources on affordable housing is commendable. However, we questions the expansion of housing assistance programs towards broader income levels when other options are available to assist middle‑income households cope with high housing costs. Furthermore, given the conceptual nature of many of the Governor’s housing proposals, we highlight key questions the Legislature should ask the administration as it considers the merits of the proposals… (more)

Download pdf of full report

 


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s