California Governor Newsom’s Budget Commits to Housing in a Big Way

By Sarah Snook, Associate 

We’re very excited to share this overview of Governor Newsom’s budget to aid Californians in achieving the California Dream. Our Governor’s budget focuses on mitigating the increasing cost of living, a campaign he’s dubbing “California for All.” Newsom acknowledged housing cost as a key driver in increased cost of living and has responded by proposing a $7.7 billion investment in housing and homelessness programs or initiatives across agencies for 2019-2020. Of this money, $1.75 billion additional dollars would be allocated towards increasing housing production and $625 million additional dollars would be allocated towards alleviating homelessness.  

The new $1.75 billion one-time, General Fund money directed towards housing production is divided among four key purposes: missing middle housing construction, expanded tax credits, incentives for local production, and technical assistance. The technical assistance and incentive moneys are distinct but related to one another. The Governor has proposed allocating $250 million towards technical assistance for local governments to plan for additional housing production. This could include rezoning for greater density or changing permitting practices to allow for quicker turnaround. Part of this process would be setting up planning milestones. Once jurisdictions reach their planning milestones, they are eligible for general purpose funding taken from the proposed $500 million incentives pool. 

Missing middle construction is residential construction that targets and is affordable to middle-income individuals, such as public service employees like firefighters and teachers. Missing middle housing typically takes the form of multi-family, low-density development such as duplexes and townhomes.  Historically, this form of housing has consistently been the hardest to produce in California; it has generally been financially infeasible to build. Newsom’s proposed plan to increase production of this housing type is to expand CalHFA’s Mixed-Income Loan Program by $500 million in one-time funds. The program currently operates on $43 million annually and provides loans to developers to produce mixed-income developments at a low subsidy level. The goal of this program is to reduce the costs associated with constructing missing middle units.  

Lastly, our Governor has proposed expanding the State Housing Tax Credit by $500 million annually. This $500 million would be split between two programs: $300 million towards an expansion of the existing tax credit program and $200 million allocated to a new program targeting moderate income households. The new program is intended to be used in combination with the Mixed-income Loan Program.  

In homelessness funding, Newsom has suggested allocating $300 million towards regional planning to allow local governments to create a regional plan to address homelessness. $200 million of these dollars will be directed towards federally designated areas and the remaining $100 million will be directed towards the State’s eleven most populous cities. An additional $200 million would be provided in incentive funding and available to jurisdictions that show progress towards developing homeless resources such as support housing or emergency shelters. Additionally, Newsom has proposed $100 million be allocated to a new Whole Person Care Pilot program, which would coordinate homeless care across agencies, including social services, behavioral health, and housing. Lastly, the Governor has expanded the 2017 $45 million one-time funding for Supplemental Security Advocacy, to $25 million annually. The program helps assist homeless and disabled individuals to apply for federal benefits.  

Aside from funding priorities, our Governor has proposed a number of policies to aid in housing affordability and homelessness, including streamlining CEQA for homeless shelters, conditioning Gas Tax transportation funding on regional production goals, and allowing long-term ground leases of excess state land for housing development.   

Some of the Governor’s ideas can be moved forward because they are within the authority of the Executive Branch; budget issues must move through the Legislature for consideration and final approval.