Assembly Budget Subcommittee No. 7 on Accountability and Oversight

Buenos dias. Good morning. I hope everybody is doing well today. Want to welcome you all to the second hearing of the Assembly's Budget Subcommittee on Oversight and Accountability. Sub Seven is unique because Members are selected for the Subcommittee based on a topic. This provides an opportunity for a robust discussion amongst Members with specialized knowledge and diverse perspectives. Today's hearing will focus on the efficacy of the state's housing investments.

Since 2019, the state has invested over $18.5 billion, including 4.2 billion of General Fund Dollars, to address California's housing crisis. The eight-year statewide goal is to produce 2.5 million homes with no less than 1 million of these homes made available for lower-income households. So where do we go from here?

Given that need and the current economic climate, the goal of today's hearing is to focus on the lessons learned from existing affordable housing programs, their investments, and these include which programs produce the greatest and most cost-efficient results. Do some programs work better than others? What have been some of the barriers to developing new affordable housing in the state? And could there be additional improvements to streamlining funding?

And lastly, if we have limited resources, whether those are bonds or General Fund Dollars, where is the best place to invest those resources? I look forward to today's conversation to explore options for expediting the much-needed affordable housing for our residents in the State of California. I'd like to now open it up to my colleagues to see if anybody would like to make some brief comments. We'll start with Subchairwoman Sharon Quirk-Silva.

Good morning. Assembly Member Sharon Quirk-Silva, Subchair of Sub Five, which has homelessness and housing under its purview. We know that housing is not just about roofs, overheads. It's also about stability, security, and opportunity. It's about providing a foundation upon which individuals and families can build their lives and contribute to society. Together, we can build a future where every Californian has a place to call home and the opportunity to live with dignity and hope.

And yet, we know that homelessness is directly related to our housing production in the State of California. So with that, I look forward to not only diving into the numbers, diving into best practices, but also to let you know that on April 9, I will be chairing a Committee on State Administration where we will be focusing on housing on that date, April 9. Thank you.

Thank you, Madam Chair. We will now move on to our Housing Committee Chair, Mr. Chris Ward.

Thank you, Mr. Chair. Thank you for the invitation to be a part of this oversight hearing today. I know as the state has made very critical investments in just recent years, to be able to do more directly in supporting affordable housing development in our local communities. That's been certainly noticed and appreciated. And we have a lot of headwinds facing us this year as well, including some trade-offs that we may have to consider through some of our Subcommittee work.

And I think you hit the nail on the head, Mr. Chair, when we said we've got to look back on the recent years of efforts, that we have deployed these resources down to community to figure out what's working well, be efficient with our dollars. And we've exploring this as well in information hearings through my policy committee hearing, the Housing Community Development Committee.

How do we make sure that we are reducing regulatory barriers and looking at other ways to be able to support more housing and affordable housing construction? I think we'll be able to touch on some of those topics. I want to thank in advance all of our panelists for being here today. I think we have a lot to learn from your direct experience and observations on many of these programs.

And so I'll be taking a lot of notes to be able to help us do our job as we work on the state's budget challenges together this year. Thank you.

Thank you, Mr. Ward. Now moving on to our colleague from the IE, Ms. Reyes.

Thank you, Mr. Chair. I'm really excited to be part of this discussion around housing programs, especially those that have been funded by the state. And I want to hear more about the direction the Legislature will be taking to make housing more affordable. I think we need to push back very specifically against the budget cuts that are being proposed. Do this as much as we can to make sure that we have a robust package of funding to address the affordability crisis.

At the very least, we need to focus on programs that fund affordable homes, affordable home building, and getting people into homes. We hear from our constituents that they do see new housing projects, but they can't afford them. I know that building more units in the long run will drive down the cost of housing, but people are struggling today, and we need to be intentional about getting people into housing as quickly as possible.

That's why, along with 14 of my colleagues in both houses and from both parties, are requesting to restore the $152.5 million to the CalHome program that was cut in the Governor's proposed budget. CalHome is the only state program that actually allocates funding toward affordable home building for first-time homebuyers and in recent years has been oversubscribed. Newly constructed homes through this program have affordable resale restrictions, ensuring that the units remain affordable in their communities for decades to come.

Given the persistent racial wealth gap that is growing in California, it is essential that working-class families and families of color are not excluded from being able to build generational wealth through homeownership. California's overall homeownership rate has declined to the lowest in the nation at 55%, and only 12% of Latino and Black households can afford to buy a median-priced home were able to buy such a home last year. This is down from 17% in 2021.

We're also championing a budget request to help fund and develop a regional online portal for affordable housing listings and information, AB 2396 which would establish the State Partnership for Affordable Housing Registries in California, or the SPARCH the grant program in order to make renters aware of the available affordable housing units on the market today.

If we let our foot off the gas, we are going to increase the gap of available homes, adding on to the 2.5 million that we still need to build over the next eight years. I'm really looking forward to hearing from the panelists. I do want to thank you for all that you're going to provide to us. Thank you.

Thank you, Ms. Reyes. And now going on to the AV, the Annalt Valley, our good friend, Mr. Juan Carrillo.

Thank you, Mr. Chair. I do appreciate the invitation and excited to be part of these conversations. We have a big challenge ahead of us. I'm looking at page five of this agenda and I see the amounts to be reverted from original amounts being put out for housing units. For me particularly, I'm interested in the potential of having more funding for ADU constructions. As a city planner for years, in my experience, projects go through the entitlement process for multifamily, and time and money is invested.

But unfortunately, those projects don't end up being built because of the lack of funding. That's the reason why I believe that being able to provide more accessibility for homeowners that want to take advantage of the ADU through some funding will actually accelerate the number of units that we need.

Why? Again, because multifamily projects do take time to go through environment process and then they just don't get the funding to be built. The ADU, I believe, is a mechanism to actually build more housing. That's particularly one of the reasons I'm interested in being here, to see how we can find some more assistance for those homeowners that want to build an ADU for generational wealth. Thank you again, Mr. Chair. Look forward to the conversations.

Thank you. And now we will move on to Mr. Grayson. Thank you for joining us this morning.

Thank you, Mr. Chair. And thrilled to be here to be able to hear the testimony. I think something very important. And that is keeping in mind, although I am 100% supportive of affordable housing, I'm also 100% supportive of housing that's affordable.

And so to be able to have housing on all the different levels to keep that upward mobility and that movement to where first-time home buyers are upgrading and opening up inventory for first-time homebuyers, and it being affordable. Having said that, back to the affordable housing component, I think it's very important that we, as the state, take a look at what we are doing and find ways to be more efficient, more effective.

And I say that in reference and context to the tax credit programs that we have to build affordable housing and how that there are multiple programs under multiple state agencies, and the coordination is not quite the best in my estimation. I see where there's different calendars, and by meeting one calendar, you actually miss the dates on another credit. By filling out an application for one, you automatically disqualify yourself in some cases to another. By meeting qualifications for one, you do disqualify yourself for others.

So to be able to coordinate calendars, coordinate a single application, and then also to create a list of qualifying factors for each tax credit that wouldn't disqualify you from another, so that affordable housing developers can actually layer the grants along with tax credits and pencil out a project so that we can have affordable housing in a quicker manner and a more effective way. So with that, I look forward to hearing testimony. Thank you, Mr. Chair.

Thank you, Mr. Grayson. And appreciate your point on a balanced approach to housing. Moving on to Mr. Patterson.

Great. Thank you very much. Really interested in this hearing. Housing is something that's very interesting to me, and I love it from a policy perspective, sit on the Housing Committee and serve as Vice Chair there, and looking forward to a lot of robust discussion this year. One thing that has been interesting to me in the development of affordable housing, and I sat on a city council, there are a lot of challenges, obviously, and a lot of that was covered already.

But a lot of the burdens are placed on cities and counties in terms of when it comes to making the projects happen, whether that's CEQA documents or the fees and things like that. We spent a lot of focus on the cities and the counties and the jurisdictions to get it done. But in where I'm from, Rockland, there are a lot of special districts that play a huge role in the development of affordable housing or maybe not the development of affordable housing.

And oftentimes they don't, well, I don't want to say oftentimes, sometimes they don't play along in the same way that the cities do and what their responsibilities are as well. So, for example, when it comes to cities regularly do things like fee deferrals, where that happens at occupancy rather than when they build the permit. And in my experience, the special districts have a lot less likeliness to do that.

And it's bothersome to me because I think everybody needs to be working together on affordable housing, and it shouldn't all be with the cities and the counties to get that down. So thank you very much.

Thank you, Mr. Patterson. And now we will hand the mic over to the colleague who represents the other part of the AV, Mr. Lackey.

Thank you, Mr. Chair. I just think, obviously, everybody that's on this Committee and everybody that has any consciousness at all knows that we need to do work on more affordable housing. The cost of housing is pretty prohibitive. Fact is, I could tell you that I have two young adult children that have no intention of ever being able to purchase a home. And I try to diffuse that and tell them that, don't give up hope.

We're going to work on this as a collective community, and hopefully we can make this within reach of just your regular resident. I could tell you that also we hear people being critical of cuts when we know we're in a deficit environment. So there's going to have to be cuts somewhere. And what I'm telling you that I'm hoping that we can get from this meeting today is where the efficiencies are.

A lot of these programs have had some success, but at quite a cost, and that's very debatable as to the return on the investment. And that's really what we need to focus on is the return of investment. And hopefully we can work this out to where that we're not totally devastated and we don't add to the inaffordability. And I think that's really where we're challenged right now, is to try to at least level it off, because the spiraling costs are reality.

And whether we as policymakers can impact that, I think is something we need to work through. And I think we can. And I look forward to our conversations, and you are the experts, and we look forward to hearing what you have to say.

Thank you. And on the topic of revenue and funds, we will now have Ms. Wicks give her remarks, our Appropriations Chair. Thank you.

Thank you, Mr. Chair. Thank you for everyone who's going to be here today. I'm looking forward to the conversation. It took us, what, 50 years to get here where we are today. We made it very difficult to build housing in California. The state has spent decades underinvesting in housing, and I think only really the last six or so years have we done significant policy change to make it a better environment and the approval process much easier to actually get projects entitled.

We've done a lot of work legislatively to streamline that process as much as we can. The Governor's also obviously made big investments of one-time funding, which has been really important. Having said that, we just really started that work in the last couple of years.

Truthfully, when you look at the grand totality of our investments as a state into actually combating the housing crisis, I think what I hear from now, from folks in the community is that the changes that we have made in terms of making more land available with bills like 2011 and other Surplus Lands Act and others, as well as the procedural changes around entitlement, have created a sea change for the process to make it easier to build housing.

Now that we have those things, we have tens of thousands of shovel-ready projects waiting for funding. We are oversubscribed in terms of shovel-ready projects waiting for funding. We are about to run out of money for affordable housing this year. So just when we are sort of turning this ship, at least it feels like from my perspective, we're just about to turn this ship, we've created a better environment in terms of streamlining.

We've done all this work and now we're about to be out of money for affordable housing. Is now the time to pull back on that? Obviously, I think, as my colleague said, we face the reality of our budget, though, and we have to balance our checkbook. That's just what we have to do. So how do we ensure that at a time when I think we are in a good place to actually build affordable housing, that we find the right ways to do that?

Obviously, I think folks know I have a bond. I'm trying to get on the ballot because I do think we need to continue these investments. But housing and ending homelessness continue to be the top issues in California for our constituents, for many of our communities. We have done a lot of work to make it a better environment. For that, I would love to hear from the panelists on is that working. Is the streamlining that we're doing working?

Is the more available land that we're creating legally working? Are those things working that we have been spending time doing? Are there other efficiencies that we can be ensuring or modeling? And from your all's perspective, how do we deal with the fact that the budget is what it is in a time when actually we need the money desperately and we're in a better place to deliver, I think, better product, cheaper, more available housing because of the streamlining work that we've done.

And I just want to appreciate the Chair for pulling together this hearing.

Absolutely. Thank you. And now moving on to the man of the hour, Mr. Budget Chair, Jesse Gabriel.

Thank you very much, Mr. Chair. First, let me say thank you for convening us on this, and really appreciate the important role you're playing now for our body, for our Committee for the Legislature. These issues of accountability and oversight are totally critical, and I can't think of a better person for the job than to have you at the forefront of this. So thank you. I can't think of a more, and thank you to our panelists who are here.

I cannot think of a more timely or important conversation that we need to be having right now in the State of California than this one to consider the investments that we have made in housing and to understand which of our policies are working, which of our investments are working and which are not.

And we know from every public opinion poll that we've seen, we know from every conversation that we have up here how critically important these issues are to the folks that we represent in the State of California. I have often remarked to our Appropriations Chair that as we look at different public policy challenges here in the State of California, in so many instances, all roads lead back to housing and our housing crisis and the challenge that we have.

So what I want to understand today is, have the investments we made, are they working? Which ones were effective? Which ones have not proven to be as effective? How might we change our strategy, given the tremendous budgetary challenges that we're facing, and that what are the important data and metrics that we're using to measure the effectiveness of those investments?

And then finally, I'm interested in speed, both how quickly we're able to make change and impact policy and change policy, but also how quickly is money getting out that the Legislature has allocated. Is that money getting out in a timely fashion in a way that's actually going to drive policy changes and move the needle in a positive direction? And then for our folks who are here who are actually doing the hard work of building housing.

Very curious for your thoughts about what changes you would make if you were sitting in our seats. What recommendations you have for all of us about how we could drive good policy outcomes and then understanding again the budget challenges we face. Is there some low-hanging fruit out there? Are there things that we could do that don't have big price tags that we, and certainly we can talk about things with price tags, but what are the recommendations you have for us?

But I wanted to be here because, for a number of reasons. One, because I think this is such an important conversation. Two, because I am pretty concerned about some of the cuts to housing and the Governor's and housing programs that were proposed in the administration's January 10 budget. So eager to have this conversation, eager to learn from all of you. And again, just grateful to our chair for bringing us together. So thank you, Mr. Chair.

Thank you, Mr. Gabriel. Now I want to move on to welcoming and introducing our witnesses for today's hearing. But before I do so, want to set the groundwork a little. This Committee is unique when it comes to formatting, so we will ask that the presentations by our witnesses today be brief, and we will jump right into the first witness from the Legislative Analyst Office to set the stage for the deliberations today.

After that, then we will go from my right down with the introductions of the remainder of the witnesses. So when Ms. Bella is ready, please begin.

Thank you. Mr. Chair, Ginni Bella with the Legislative Analyst Office. We prepared a handout for you today as background for your discussion. It should be in your packet, and it's also available publicly on the Legislative Analyst website. The handout is really a synthesis of data that we received from the Department of Housing and Community Development and the California Tax Credit Allocation Committee. It's really pulling a subset on a subset of programs and providing information on funding levels and units assisted by that funding.

So it's really coming from the departments and from the agencies. It does not include all of the programs that they oversee and really focuses on the ones that have received larger infusions of state funding over the last few years, not those that are receiving federal funding. Just a few cautionary notes as you review the information. They're laid out on page six of our handout. But really, you have to think about this information as point in time.

Some of these programs are currently in the process of awarding funding, and so the information could be changing day by day in terms of the estimate of the units assisted and the funding out. So just one thing to think about as you're reviewing. The next is we really emphasize this term, units assisted and that's because, as you know, affordable housing units really braid together funding from a variety of the programs.

And so to think about each program, we think about it as units assisted rather than created, because no one program is completely creating that unit. And so you couldn't go through the handout and add up all of the units assisted because that would be a real overcount of the number of units.

That said, over the weekend, the Department was able to produce an estimate of the unduplicated number of units produced since 2018, and that estimate is just short of 57,000 for the Department of Housing and Community Development, which is about 2000 more than this time last year. We haven't had a chance to fully review that estimate as it came out over the weekend, but we are joined today with panelists from the Department of Housing and Community Development.

The final note we would make, as you're looking through the handout is that when you think about a unit that's created or assisted and created, to think about it as serving, obviously, more than one person over its affordability term, at any moment, more than one person lives in that unit, and that unit will turn over a number of times in its affordability term.

In our discussions with the Department, we understand that they think about a lot of the units as serving 17 and a half people on average over their affordability term. That concludes my opening remarks. I am joined here with experts from the Administration and from the field to answer questions. Thank you so much.

Wonderful. Thank you. And if we can move down to the right, just your name and position that you hold. Thank you.

Thank you. Zach Olmsted, I am the Chief Deputy Director at the Department of Housing and Community Development.

Thank you. I'm Executive Director of California's Tax Credit Allocation Committee and the California's Debt Limit Allocation Committee. Allocating federal and state resources for affordable housing.

Good morning. Jeff Schroeder, I'm Senior Vice President with Ponderosa Homes. We're a privately held home builder, been building homes in 40 for over 50 years. And last year I was Chairman of the California Building Industry Association. I'm Chairman emeritus. This year, still really involved in some issues surrounding building more housing.

Good morning. My name is Laura Archuleta, and I have the honor of leading a 30-year-old nonprofit organization called Jamboree Housing Corporation. We are headquartered, as you might guess, in Irvine, California, with offices in Sacramento and Santee. Having been doing this work for over 35 years. Prior to Jambury, I worked in the cities of Anaheim, Garden Grove, and Palmdale, doing housing elements, first-time homebuyer programs, and producing affordable housing. And happy to be here.

Thank you. And once again, welcome, everyone, whether it's near or far. Really appreciate you all joining us this morning on a Monday in Sacramento to have this very timely discussion on housing. We will now move on to Committee questions, but before we do that, I'd like to take an opportunity to ask a few questions of my own to set the foundation and then move on to the deliberation. So for HCD, we are at a pivotal point in affordable housing.

Previous bonds have been exhausted and we cannot leverage General Fund dollars. And the Governor has also zeroed out $1.0 billion in funding for housing in this proposal. With this looming housing cliff and an ongoing housing crisis, we really do need to course correct. That starts by understanding which programs have yielded the most effective results and which have not. And I mentioned earlier in my comments, a substantially large number, $18.5 billion of investments towards housing in the last five years.

And when we talk about that, it's with a B, right? So it's a large amount of money. So can you please tell us how many units have been produced as a result of that $18.5 billion since it's been allocated?

Sure. Zach Olmstead, HCD and thank you to the LAO for kind of highlighting a little bit of what I can explain. I think you guys have before you, housing is a little bit complex. And so it's not as simple as adding up all the stuff that is assisted. And many sources, especially because of the work of this Legislature, have actually been, we've been asked to consolidate and combine them through kind of bigger notices of funding availability that combines several programs.

But all told, we've seen through the state investments about 57,000 units assisted. Many of those have already been completed and constructed, over 10,000 of them. I think it's about 22,000 that are currently in construction and the remainder have been awarded but have not yet broken ground with construction. So maybe they're seeking their final piece of financing through the tax credits or bonds that are administered by Marina here. So that is part of the story.

We have a number of funding announcements about to be announced and released that aren't reflected in that data. So from last year's, what we call our multifamily supernova, which combines several programs, those awards are kind of imminently about to be announced. So see that number jump by about 5,000 or so. And it doesn't account for federal investments either. And so that's why you might see last year when we provided some data, that number included some of the federal programs.

We've broken them out differently now because I know you're interested in the state programs. So we have another probably 4,000 units that have been assisted on some of the major federal production programs.

Thank you for that. So we're talking 18.5 billion, about 57,000 units thus far. I'm a visual learner, so I like to see charts and graphs, and pictures. Can you describe so that we get a better sense of the components of cost? Maybe in some sort of pie chart. Right? A percentage of that 18.5 billion. What has gone towards administrative efforts, construction, labor? What money is still on the pipeline? Right? If you can give us a synopsis of that, that would be helpful.

So for the most part, our administrative costs are capped at 5% for all these programs. But for the most part what folks are seeking through HCD's programs, and there are some variations which I'm happy to elaborate on, for the most part, they're getting permanent financing and they're getting a construction loan from a bank to do the actual construction and then that gets paid off through a permanent loan at the end.

So for the most part, our funding is kind of first money in, so to speak, the gap financing that is required to complete that construction. And so they are partnering, often with many other sources. They're leveraging that fund with local, other federal sources. A difference would be the Homekey Program in which the Department essentially is providing 100% of the acquisition cost and often even some number of years of operating support within that program. So that's a unique program, a little bit different.

It's not a typical new construction program where it's more of an adaptive reuse we're seeking to acquire. And that is about almost 4 billion that we'll have administered when we make the final awards this spring. So for the most part, trying to do the pie chart is a little challenging, certainly, but our funding comes in, and then it gets private bank loans, for example. And certainly, some of the developers might be able to give you some test cases.

They might be good examples of what you're talking about. And then it is typically partnered. Almost every affordable housing deal is seeking tax credits or bonds for that final financing piece. So they're trying to secure, for the most part, the majority of their funds, give or take, through HCD, local or federal resources. They're often cobbling together five to 10 different sources. That's why we've tried to consolidate where we can on these programs.

But we are oversubscribed for the most part, in each and every one of our programs. So there is certainly a demand for that type of financing, which I'm sure some of the colleagues in this panel would like to elaborate on.

Thank you. Yeah, and if we could also have some of the developers answer that question. In your experience, how that pie chart looks?

Well, yeah, I would just say that everything you heard here is what we experience. A couple of things. I would say HCD's money is first money in from a commitment, but not first money in, actually, and that's a big cost. So to me, that's a low-hanging fruit. Right?

Is if HCD could come in during construction then. The other thing I'd say is that the pie chart, keeping in mind, when you look at all these different subsidies that are going in, each subsidy costs around $10,000 per unit. So if you have HCD, you have TCAC, you have city money and all of that. That's just going to add up to be about 50, if you have five sources, about $50,000. So I do think there's some low-hanging fruit.

I would also encourage you, again, having been staff at the city level, you have really smart people working in your housing programs. Ask them if they were king or queen, what changes would they make to the program to make it more efficient? Because there is a lot of money going out, and I think there are efficiencies there, and there are efficiencies that could help in a big way.

The other program I'd point you to look at, and everyone hates the R-word, but in old days, redevelopment. You talk about and Assembly Member, Wicks, you talked about the money coming in now, but back when I started again the 35-year history, it was a billion to $2 billion a year in affordable housing. And I remember sitting up here with the legislators saying, if you do away with this, housing production is going to stop. And here we are, what, 14 years later, 10, 12 years later.

So thank you.

I just want to add, Eden has worked with pretty much every acronym HCD has ever invented. We're 55 years old, we have an aging portfolio, and we think it's really important that the Legislature continues to invest. We think depending on how much funding the local government has, it's between 150 and $300,000 in state dollars per unit that we need from state programs. We like the ones that are broader and more flexible, like MHP and IIG, because you can use them across all of the jurisdictions.

We also think you have to enable the locals to raise their own money. As my colleague mentioned, the laws of redevelopment has really left the locals in a bind. ACA 1, probably streamlined, is going to be super important, particularly for the Bay Area where we are based, because we really need local dollars, we need more money from the state if the locals can't generate it, it's really quite simple. So thank you.

As a market rate housing builder, I don't have a lot of expertise on affordable housing issues. However, I am experienced with it. We have done an affordable housing project on our own with just TCAC dollars, and I'm able to do that with enough scale. Give me enough land and enough units, I can build affordable housing with just TCAC money only. Okay, so that's something we can talk about later if you want to.

But there are a lot of issues surrounding the cost of housing I'm here to talk about. But these two experts are much more informed than I am on building affordable housing on a regular basis.

I just want to add one sort of clarifying thing to the total amount that has gone out of that $18 billion. Only a portion of that are like the homes that, Mr. Olmstead here, mentioned that were produced. Some of that is passed through money to local governments, local planning grants. Some of that is federal pass-through money, CDBG funds, home funds that, again, aren't captured by the number of units that Mr. Olmstead articulated.

So just to make it seem like there actually is much more, a multiplier of units that are not captured fully in the picture of that 18 billion to the 50. What did you say, 60,000 units or so?

And I do appreciate that. But then that doesn't give us a clear sense of how severe the housing crisis is. Right? So are we in a housing crisis? Are we not? I think we have to go with the numbers that we do have now. We know that 18.5 has gone into that, 57 is produced. And candidly, Californians are struggling when it comes to affording housing across the state. So really do appreciate that perspective also.

Moving on to Assembly Member Sharon Quirk-Silva, I believe she has some questions. Thank you.

Yeah, I'm just trying to get a picture of price per unit, and let's just look at the Homekey Program. I know there's a lot of other programs, but on the Homekey Program, which we know is a signature program of the Governor, what would be the average price? Whichever way it's funded, whether it's through additional resources coming in or just state dollars, what is the average price of that unit?

And I know that there is some wraparound services that go into that funding, but the average price is the one question I would like to know. And then the second question is, can we build these units at a less expensive cost? There's all types of housing that some of us see through our feeds because we click and we see these prefabs, we see all kinds of housing. So is there a way to build these types of units for less money?

So how much is the average Homekey, and can we do it for cheaper?

I can start with the Homekey question and certainly make sure all of you get, we have a dashboard for all this information on our website. So you might want to cut and slice it a number of different ways because you can see certainly variations across our funding rounds, across regions, all that sort of thing. But typically we're seeing Homekey come in at least probably half the cost of new construction.

It's gotten a little bit more expensive in the subsequent rounds, perhaps because if you remember, in our first rounds, we were really able to take advantage of distressed assets during the pandemic. Right? And we were helping to purchase. For the most part, it wasn't exclusively, but for the most part, the majority was the purchase of hotels, motels. That still does continue to be the most utilized kind of intervention.

But as you can imagine, as we've come out of the pandemic, sometimes prices are a little bit higher. You see purchase price be a little higher for ones that are more move-in ready than you see ones that require some rehabilitation. Maybe the purchase price is less, but there's some cost for rehabilitation. But we certainly are still seeing it, for the most part, in the 200 to 300,000 range. Like I said, there could be some variation based on the use or the intervention there.

So we are seeing it come in at significantly less than new construction. We do have a handful. We try to be very flexible with Homekey. So we do have a handful of projects that do allow for what we call new construction, but we ask that to happen within a year. So you might see some more innovative kind of models, like there's ones that have utilized reforming shipping containers, those sorts of really quick new construction. But for the most part, it's kind of an adaptive reuse, acquisition, and rehab.

So about 250 to 300,000 on a Homekey. What about affordable unit?

Well, what we invest is not at that level. Right? So you might probably best to maybe look at a project-by-project basis. So the totality of total development costs may not be in a new construction program. What HCD is necessarily contributing to, as was noted, we might be that first money in committed, and then they're partnering maybe with other local money and tax credits and the like.

So our investment may be the same or similar, even less on a per unit basis, but that might not be the total development cost. As was noted, they're seeking maybe 100 to 200 or 300,000 from us per unit, but that may not be the total.

That won't be the total. I think the Jamboree wanted to.

Please.

Hi. Thank you. Yeah, we've been really active in Homekey, and it's been very successful for us to be able to move quickly on these projects. So we've probably been around 250, up to 500 when we've been up in Santa Clara County and buying developments that already have kitchenettes in them. So we can quickly move people right off the street into those units. One of the keys with Homekey, that is a huge cost saver, is the time.

When you got a Home key allocation, you also got your entitlements with it. And that is a huge difference than building new construction. The cost of taking a project through entitlement, as you all are aware, is tied up in the time that it takes. And so that was a big success, I would say, for Homekey.

On an average affordable housing unit, not Homekey.

Yeah, unfortunately. And Linda probably has some numbers, but I'd say we're probably closer to 400,000 to 750,000 in our more coastal regions.

I think probably the highest-cost locations are in the inner Bay Area, San Francisco. Really high cost. I just want to talk to modular. We just completed a modular housing project with Factory OS, which is signatory to the carpenters union. On a price-by-price basis, it was slightly more cost-effective than new construction, but it was faster. And so the speed actually matters, especially now in the interest rate environments that we're in because time is really money for these projects.

And I can only echo Laura's comment about streamlining where we have entitlements or direct routes like Homekey or the Accelerator Fund, where we did not have to, when we were building housing for the homeless, go through any protracted entitlement process. It's just so much quicker and much, much more cheap, much more cost-effective. And then the acquisition of existing structures, in most cases, not in the case of office buildings, is also substantially less expensive.

An extended-stay motel, a residence inn, those are really the most cost-effective kinds of projects you can do, but they are limited to the types of families they can serve. They're not very big. So if you're in a rural area where you have large families, that's not an option for those buildings. So just a comment about who you serve with those buildings.

If I may. I do think an important consideration for you all to think of in terms of public benefit is when, at least for HCD-funded projects, but for almost all affordable housing programs, we are buying 55 years of affordability. So when you hear that cost per unit, that is the one-time cost per unit, but we are getting that benefit over generations and many, many households.

And so it's not as simple to say, hey, it costs this much and we got one household, because you're not serving one household, you're serving many, many households, many, many people over the course of that investment. So it is an upfront one-time cost, obviously new construction. But I don't want to discount the impact that makes long-term. And we do require regulatory covenants that require those units to be affordable for 55 years.

Thank you. I would like to comment on that note. In my professional experience prior to getting elected to the state Legislature, I had an opportunity to work for a former Legislator who represented the southeast L.A. portion, some portions of Watts and Athens, and did some community work in some housing projects, Nickerson Gardens, Jordan Downs. And I vividly remember one experience, a family who had three generations in that household. So I do agree and also support these projects, helping families, multiple families, long-term.

But I think we also have to be mindful of the shortcomings that these types of projects do have and also providing additional resources so that folks don't stay stagnant in these places. And then it's a way to move up in society as well when it comes to financial means. So, again, I think we have to be mindful about those differences as well. Moving on to Mr. Assembly Member Jesse Gabriel.

Thank you. Thank you very much, Chair. So, first of all, thank you to the panelists. I think there's a wealth of expertise and experience and insight up here.

I want to see, just for someone like me, who's trying to think about all these different challenges and opportunities out there, maybe if we could just start, for me, at least at the beginning, which would be as we're thinking about our budget this year and the investments that we've made in the past and the investments that we might make in the future or potentially where we might need to make cuts, I want to get a sense from the folks up there about what investments you think have been most impactful, what you think have had the least ROI and been the least effective, and then maybe some suggestions for us to think about that.

So, Mr. Olmstead, can we start with you? What do you think the best investments that the state has made in housing production, both for market rate and for affordable housing? What are the programs that you think have delivered the best results?

I don't think the state does much on the market rate side. I mean, there's some tangential, but I think all of our investments that our Department has administered have been successful in the sense of they're producing affordable housing. Right? We're implementing the programs that we're given here, and we are oversubscribed for all of them. Right. So the demand is certainly there. There's just different types of interventions.

We have many programs that seek us to target at maybe a very low area, mean income rate, or for a subpopulation that is harder to serve. Right? We have programs that serve veterans, programs that serve people with chronic mental illness, all those sorts of things. And those are more challenging in various things. If you have a support services plan that is going along with them, there might be longer operating assistance needs.

But I would say they're pretty critical if you're talking about what we're doing to try to address and alleviate and hopefully end homelessness, each and every one of our programs does target, like, even our affordable housing, sustainable communities program, or multifamily housing program, they all actually the best scoring projects are the ones that maximize public benefit by serving at the deepest level. Right? So when you're thinking about what is that return on investment or impact, it's the households we're serving that may be at the deepest need.

And that is certainly the programs that our Department administers. There are some other programs on the housing side. There are sister agencies, the California Housing Finance Agency. Certainly, tax credits kind of do the gamut, but when you think about what HCD does, it's really that deep targeting-type stuff. So certainly I think they've all been successful in the sense that the housing is getting built, households are living them. It's great to see those people's lives transform. We certainly need more. Right?

One of the things HCD does is administer these programs, and we think we're doing it pretty effectively for how they're structured and just the nature of the complexity of housing finance. But it's not the only way in which we get more housing built. And so we also implement a lot of housing laws that have been passed over the last couple of years. Right? We're doing a lot to bolster ADU production. We're seeing significant jumps there.

We are utilizing state excess land, excess sites, and public lands. We're seeing a lot of activity there. And our accountability work is also making sure that the local level housing of all types, affordable, and market rate is actually approved when it should be approved. And so we've actually seen a big jump up there. I think we're like probably 6,500 more homes built just because of that work.

So when you ask the question like effectiveness, I think they've all been effective in the sense of we've all been able to administer them and we've been able to do it quite quickly. But others who are utilizing those programs could also.

Let me bring in some of the other folks in the conversation here. I'm glad to hear that you think that they've all been effective. I think what I'm looking for is relative effectiveness. I understand that there are different subpopulations and different goals with different parts of these problems. I'm very keenly mindful of that.

I think what we're trying to figure out is, in a time of potentially tremendously scarce resources, how do we target investments, and where are we going to get the most bang for our buck? Where are we going to move the needle most? How are we going to help the most people? And I'm curious if others on the panel want to weigh in here, as we might have to make some difficult choices in the coming years.

And let us know, what would you recommend to people in our shoes about where we target those investments? Ms. Wiant?

Thank you. So again, I can't comment on sort of which is better. I can only comment on what we've seen done within the tax credit program over the last four years, and since that's the program that we administer and looking at, sort of comparing the amount of new construction units we've been able to produce as a state through the Low-Income Housing Tax Credit Program

The last four years, when we had the additional 500 million of state credits, we've been able to produce over 48,000 new construction units during that four-year period. Looking at the previous four years, where there was no additional enhanced state credits, we were only able to produce 22,000 units of new construction.

And the bulk of that during that period, most of the production was focused on, or most of the resources were going not to new units, but to rehab existing units. So I think those numbers really just show the benefit that the additional resources have been able to provide in terms of production of new units for low, very low, and extremely low-income households. More than double we were able to do in these last four years because of that.

Yeah. Thank you, and congrats on the new gig. I agree with you. I think those numbers do jump off the page, and I would be a proponent for locking in higher levels of ongoing funding for the Low-Income Housing Tax Credit. I think that's one of the most important things we can do. But I do think this question of which is better, relative effectiveness is a really important one. And so maybe I see Ms. Mandolini.

So I have to echo what Marina has said about the state credit. I think it needs to be permanent. Frankly, it's hard to gauge what's permanent, what's temporary. And just making that permanent, I think, would be a huge lift for the state. It would also engender private investment. Right? So it's not just the state credit, it's private investment in the state credit. And so that's a really important aspect for us as we do our work. It's incredibly flexible.

So you can do rural housing with the state credit, you can do urban housing with the state credit. You could do housing in L.A., and you can do housing in San Francisco. You can do housing in San Diego with the state credit. It works everywhere. And so I would encourage that. I also think MHP is similar. It serves folks at a certain income level, and you can use that program pretty much everywhere in the state. The same with infill infrastructure.

I think those three programs have the broadest flexibility, and they don't prohibit you targeting specific populations or giving HCD the regulatory capacity to target specific populations from round to round. But it makes a huge difference. And so I would just really encourage thinking about the broader programs. And then depending on what happens with Prop 1, Homekey and those programs have been super important. They're not the same as permanent supportive housing. The Homekey units are the biggest challenge there is.

You can buy them and they cost you less, but they cost a lot to operate. And how you're going to cover the long-term operating subsidy is really the biggest challenge. And so that's always our worry, is you can do it for five years, but what do you do for 50 years to make those projects successful?

Thank you. I support what my colleagues' comments were on the different programs, but the one thing that I really want to stress is with MHP, it's a broad enough program that you could meet specific needs because we're looking at the entire state. So you could fold in a rural set aside. You could fold in a veteran set aside.

We see VHHP, an important veterans production program, maybe not getting funded to the level it was before, but we could Fund housing for our veterans through the MHP program. And so streamlining and simplifying the programs again is going to save you costs. Right? Because you've got one route and one direction with that. So I think that's a big one.

And then I'd like to respond to some of the early questions about homeownership, because wealth building is extremely important, and homeownership is the key to that for many of our residents. And back in the day, Cal HFA ran some really good first-time home buyer programs. I know recently they had some funds for one, but there are more programs out there that could be used, and I don't think we can forget that. They're a really good partner for what we're doing on the multifamily side also.

Thank you. I'd like to take kind of the bigger picture, speaking as a builder and then as a CBI former Chairman. The biggest problem we have with building any kind of housing whatsoever is simply the lack of available land on which to build it. Okay? There's just a supply problem that we have here that's endemic in the state, and it's made worse in Northern California, for instance, we deal with urban growth boundaries. So urban growth boundaries, I call exclusionary zoning.

We're basically excluding the ability of people to buy into that market because once you draw that line, you automatically boost the value of land inside that line. So you're limiting the available land for housing. You're boosting the value of it. So everything you build inside that growth boundary, that's inclusionary or affordable, the cost of all that land has gone up astronomically. And you've basically given every property owner a subsidy. Okay? You've subsidized all the property owners to the detriment of people who don't own housing.

And so, like I said, give me 1000 units, I'll give you 200 of them, 100% affordable with no subsidy whatsoever except the tax credit program. So my understanding of. Not an expert, but my knowledge of and use of in providing affordable housing because I've built plenty of inclusionary units that are for sale in the subdivisions that I've built over the years, quite a few of them.

It's a very inefficient way to provide affordable housing. I'm sure you probably know that we can get into that, but give me land enough, a scalable project, then we can deliver affordable housing units with only the tax credit subsidy because I can subsidize the rest of it through the scale of the project. Okay. So that's important to know. And when you. It's great. I mean, you guys have done a wonderful job coming up with different programs to fund affordable housing.

But if you're pouring all that into the same bucket, from a land standpoint, if you're not increasing the availability of land, then you're just raising the price of all the land that's out there. You're providing more money to buy the limited amount of land that's available for housing, so you're automatically increasing the cost. I just wanted to make that point. It's very important. It's a big picture here.

Yeah. Thank you. I appreciate that. I have a bunch more questions I want to defer to my colleagues before I ask a bunch, but I do just have one more that I want to add on to this because I think it's related. I think part of the frustration that we have from residents here in the State of California, and certainly from lawmakers, is speed.

Right? And how long things can take and how long it can take to make progress on this and sometimes feels like we're going in the wrong, often feels like we're going in the wrong direction. So as you're evaluating the different tools that we have at our disposal, the different potential policy interventions, different investments, do any of them stand out to you both in terms of either that they're able to deliver results quickly, or that things move too slowly. And would love your candid thoughts. For those of you up there, on the speed in which maybe HCD or others get money out, make money available, evaluate applications, those types of things, where should we be thinking as we're thinking about how we can move the needle here, but move it quickly? Ms. Mandolini.

So I want to just advocate for more of an umbrella approach with the HCD funding, and I'll use our own experience with the supernovas. We went in the first supernova with six projects. One of them got funded. So really coming up with a strategy to fund more all at once.

And there's a challenge right now that you might go into the supernova and get one of the three programs that you've asked for, which means you go in year one and you get one program, you go back a year later, you get a second program, and maybe you go back a third year if you can hang on to years 1 and 2 and get a third tranche of dollars.

So really consolidating, I think, is important, because once we get funded, then we have to go compete for TCAC dollars, which is yet another year, maybe two. We compete a lot in Assemblymember Wicks's district in Alameda County. It is incredibly competitive, so it's very unpredictable. So from the time you get entitled, which is getting quicker, the time to get funded is really long. It could be up to four years and multiple tribes. So I think we have to think of a structure that makes that quicker for everybody.

What Linda's describing, though, is the time it takes to get the funding. But once you get the funding, the projects we prioritize projects that are ready to close within 180 days. And so once you get your funding from the state, the project is going to be closing within 180 days. It's going to be going to construction within another 180 days after that, and it will take 12 years to get built. But so it's actually like pretty quick process.

Once the developer gets their funds, we're talking three-ish years from receipt of funding from the state to place in service with residents in those homes. Yes, the process can be lengthy, but that is like sort of the front end. And really an example of the need that the developers have described. Like, our program is oversubscribed two or three to one. Getting that funding is what is slow. Once that funding is out the door, it's fairly quick.

I would recharacterize. It's the competitiveness of the funding. Right. Our funding is available very quickly, but then you have to wait to get the 100% of your financing. I think the policy question that you're really struggling with is 20 years ago, when I started working on this, the name of the game was leverage. It was always like, the state comes in and gets a percentage here, and then you go find your federal funds, and then you go find your tax.

And that was like the policy choice of the day because the state did not want to fully fund the development, right? They wanted locals to have skin in the games. They wanted private financing leveraged. They want to be able to say, hey, we're leveraging all this private financing. And that, for the most part, is still how we're doing it in new construction programs. We have upped our loan limits and that's why you see more, because maybe there's been fewer resources at the local level to pair.

But for the most part, you're still leveraging in a new construction program. Homekey does not do that. Homekey, we give you all the money, we buy it for you. We took out that element. Right now we get less housing by doing that. Right. If we said, oh, we're only going to get 50%, we'd be able to award twice as many projects. But maybe then they're waiting 23 years. Right. So there's a trade-off there of speed versus production.

But I do want to highlight something. Laura said the significant difference in Homekey 2 is the entitlements being complete. We, I think very shrewdly in that time said, basically, if you have a homekey project, it conforms with the land use. And what that means is any project is good to go. It means locals can't stop it. And that is not without consternation at any local community levels. I do want to acknowledge that, but it is a significant factor in the speed once people are ready to go. That's just some of the considerations you might want to think about in terms of the utilization.

Yeah, I think part of what triggered that is I was looking over the helpful materials that the LAO prepared, and I was looking over at this foreclosure intervention housing preservation program, which notes that the 2021-2022 per budget provided 500 million, but that it appears that none of those grants have gone out.

Yeah, that's a very unique program. We couldn't administer it till budget changes happened last year in the budget. So changes were identified based on the structure of that program. It was a very complexly structured program that required us to then administer to fund managers, who then administer it. And that's not even a new production program, by the way. This is about kind of acquiring homes at the local level, kind of very unique, untested, frankly.

And so it required some changes, even based on what the advocates for that program wanted, that then had to take place in the budget last year. And then subsequently, of course, some of the funds were spread out. So since those changes happened, then we're able to initiate the contracting process with fund managers of which is nearly complete, but certainly in an uncertain place now.

Yeah, no, I mean, it definitely caught my attention. I understand, too, that the administrative costs there are something like 20%, and so it's worth thinking about how we might make progress on these issues at the pace that I think Californians are expecting us to. I think we've got to think that.

That is the administrative cost in the statute that we are seeking to, that we are implementing. Right. That's not our cost there. That was some of the changes sought by the fund managers in order to be the carrot, so to speak, to administer the program. So it is a quite complex, unique new program that literally said Department. They kind of said Department. You're a pass-through to these fund managers who then do it. And so it created a lot of, I'm not going to say inefficiencies, but many steps in the process in order to get to the eventual goal.

Yeah, I mean, I think as we're looking at half $1.0 billion that was allocated a couple of years ago, that isn't out. And we're thinking up here about the policy choices that we need to make to solve homelessness, I think we just have to be honest with ourselves and honest with the public about what's working and what's not, what dollars are going to get out the door quickly, what dollars are going to drive policy interventions.

So I think that's part of what we're trying to, at least from my perspective, and I'd hope from the Chair's as well, have these honest conversations about which programs are working and which aren't and how we can do better because I believe that that's what the public is demanding of us. They want to see more progress on these issues. Californians are struggling mightily up and down the state because of our housing crisis.

And as we think about taking very significant sums of money, in this case, half $1.0 billion, from my perspective, we can do a lot better than that. And so we want to work with all of you and also get your honest perspective and feedback about what are the changes we should make. How can we do this better? How can we meet this challenge better?

So I'm eager to have those conversations, and particularly as we enter what are probably going to be more turbulent budget times, we're going to have to have those conversations. We no longer have the luxury of big surpluses, and frankly, even when we had big surpluses, that's not an acceptable outcome. So we look forward to having that conversation with all of you. I'm going to save the rest of my time if we have some time at the end, but thank you, Mr. Chair, for the opportunity.

Absolutely. Comments well received. If we can move on now to our approp chair, Ms. Wicks.

Thank you, Mr. Chair. I have so many thoughts and questions and opinions, but I'll try to keep my opinions to myself and more ask questions. But I think first for Mr. Olmstead, why is it that HCD's money comes in at the end versus upfront for construction costs, if that could reduce the finance?

I think part of the question was what I previously said about leverage, right? I mean, we're that first money in to show that the project is real, that they can then go secure their finance like they get the award right from us, and then they go typically use that to go secure other funding. Right? This makes it look more real as a project. Obviously, this is how it's been done for a while.

But I think part of the consideration here is there are banks that fulfill that role, right, of construction financing and they do it well and they know what they're doing and they do big business and we're leveraging that private financing there. Should the state interact, we just arguably be replacing what the banks are already doing, and I'm not sure at what administrative or efficiency benefit. And it would probably be an incurring of risk on the state that would have to be considered. Right?

If something happens in construction, then the state is more liable on that end. So there are some legal considerations as well. Would that trade-off be worth it? We're not staffed to do that. Right? We don't have assets to kind of tie to that loan like a bank does. So it would change the financial structure of when we come in, we are trying to explore it and we have been able to do it with some federal programs and some of the like, but there are trade-offs and considerations around liability risk to the state. Are we just replacing something that already maybe exists and at what benefit?

But if we were able to, that could save us resources and time.

I don't think it would save any resources. I think what folks are saying is they want the same amount of money, but they just want it a little bit sooner and for us to kind of fulfill that.

I think some other folks want to pipe in here.

If I could just say. And then I know my colleague Linda has a really good example, because we talked about this, but cities often will put their money in with the bank upfront upon closing. And so then the bank actually monitors the construction and releases it as a construction lender would. So, yeah, the banks are providing right now construction loans at a very high cost to that affordable housing unit. And I think, Linda, you read an example to me that was shocking.

Yeah. We have an $8 million PRP loan for a project and 1 million of it is going to construction loan interest because HCD can't do the construction lending. And so I would suggest that being a construction lender is actually something we need to figure out how to do.

In a previous life, a long time ago, I worked in the City of Boston for the State of Massachusetts, and they put all of their money in with the primary lender, and they did all of the Construction Loan Administration. I don't know why California can't do that. I would also suggest that we do have an agency, the California Housing Finance Agency, that does do construction lending. So there might be a way, working with your own agencies to figure this out. But in a 2% interest rate environment, maybe it's not so hard, but in this current rate environment, you can save millions of dollars for these projects, and if you want to streamline construction.

So this could be an area where we could have more efficiency to make our dollar stretch further.

Absolutely.

Great. Okay. The other thing, Ms. Mandolini, you had mentioned this idea of sometimes taking up to four years to access all the funds in the current state that we're in, where we have 200,000 folks experiencing homelessness, four years feels like a really long time.

And, I mean, I've talked to developers who this has changed somewhat, but saying it's taking 10 years to break ground on a project because of financing and entitlement and permitting and CEQA, and all of these things that have created a system of inertia that is literally designed not to build housing. And we're trying to break through that log jam on the accessing funds from sort of multiple sources and that sort of four-year timeline. Are there reforms we could do within that? And I'm sort of channeling Mr. Grayson here, I think, who's not here, but are there reforms there that you think we could do as policymakers to make that more streamlined?

So I think the challenge is, the fastest project we've done is with accelerator funds when the state just put all the money in that we really needed. We didn't even go to the tax credit allocation committee. We did it in San Rafael for a project that is building housing for permanent supportive housing, so you could put all the money in all at once.

I think the challenge is the two agencies, and I think we're trying to get coordinated, but unless we can really come up with a predictable stream with TCAC and HCD, it's really challenging. And I think that's the place where we can find the best opportunity to coordinate. And maybe Marina has some ideas on how that could happen.

Do you want to opine on that, Marina?

And it's hard because prior to taking this job two months ago, I was an advocate and so I'm still learning to take that hat off a bit. But I think one of the biggest challenges I would say that the state has is this boom and bust cycle of funding. And so when we have years where there's a lot of money and HCD is under a lot of pressure to get all that money out quickly, it creates other tightenings within the system because we just don't have unlimited resources in all buckets. Right?

And so the benefit of having something that is consistent and ongoing would be that we could better size sort of how much of the federal credits and how much of federal tax and bond authority do we need to match with the resources that are coming as they're coming. And you could just have a much more steady and predictable path of how we would finance and how much is available.

And the development community, who can also speak for themselves, I imagine, would benefit from seeing like, okay, I know that X amount is coming every year for the next couple of years. However, 10 years forever, which I think is where the benefit of redevelopment often came in, was because there was this predictable stream always every year that then was paired with other resources.

The challenge that we have as state administrators is when you have these boom cycles, it's like how do we suddenly modify the system to meet the demand in an efficient way to pair with those resources? And then we're going to have the next challenge in bus cycles of how do we best utilize the federal resources we have without additional state dollars or local dollars to leverage those federal funds. There's just a disconnect there.

I agree, but I do also think there could be room for some reforms around streamlining the resources that the developers get for the projects, right? And I hear you completely on the challenge of one-time funding versus ongoing funding, which you, Ms. Archuleta, also referenced as well. Without that redevelopment funds, that was kind of a consistent level of resources that were available that you could plan for, essentially. Can you also just talk through a little bit when we do have the one-time versus the ongoing and what that means in practice?

Well, it is really mean. Thankfully, both Eden and Jamboree have been around for some time. So we have built up some funds for pre-development, but for newer developers and especially some of our young minority developers and young by I mean they've just maybe incorporated. They're getting started. It's really hard to get started.

So you are only going to want to spend pre-development dollars on a project that, you know, there's consistent funding for. Right? And so it's huge. So right now we're looking even just at Jamboree with a handful of projects that we've had to put on hold with the state credits now not being available. It's huge.

And so we'll have close to 1000 units that will have to be put on hold right now throughout the State of California in many of your areas that will not be able to be brought forward. And that housing development, we target extremely low-income housing for the most part. And we oftentimes, as we say, we're changing lives, but oftentimes we're saving lives of folks. And so that's not going to happen if we do not have this consistent kind of the state credits, the MHP program being funded and coming forward.

Great. And then I'll just ask one more question, then I'll turn it back to the Chair. Do you all see additional need for more streamlining? Either I'm going to just use the third rail, CEQA, or other areas that you think we would benefit from in terms of making our resources go further and our ability to build housing quicker.

Well, so at Jamboree, we're fortunate we've only been involved in one CEQA lawsuit, but I know that Eden has had the opportunity to be involved in a few more. So I don't know if my colleague would want to comment on that.

So I actually really want to commend the Legislature for doing all the streamlining work that you've done. It has made an enormous difference in our ability to move projects forward more quickly. I think we still have a little thing we could do, but I understand that's probably impossible. I think we need to make 100% affordable housing projects that have cleared CEQA ballot proof. I think you cannot make them subject to referendum.

If you have another 2 hours, I could tell you a story that would curl your hair, but it really, really, I think we're in this really odd game of whack a mole now with some of the wealthier communities who don't want to build. And I think that we've closed almost all of the challenges you can have under CEQA. If it's on a site that's zoned for affordable housing or could be converted to affordable housing, you pretty much can build it as affordable housing. But I think people are looking at the NEPA program to sue. They're looking at the ballot to take you to the ballot. And I think we have to be super vigilant to try to get these projects done like by right, no challenges. Thank you.

Or at least if there is a challenge, you get one shot, right? You don't get to come back again and again and again. I can just tell you just having a little bit of secret experience under my belt in 35 years. Not only it delays the project, it doesn't prevent the project, it just delays the project. And my experience has been in a good market. Guess what? I made a lot more money because I got sued under CEQA. It's unfortunate that housing would have been a lot more affordable if I'd have been built it before we got without a lawsuit. It's unfortunate, but it doesn't always work out that way. But I've seen it happen. Thank you.

Thank you for those candid responses and comments. Moving on to our housing chair, Mr. Ward.

Great. Thank you for this very thorough discussion this morning. I think I wanted to bring it back to my interest overall to be able to look at these line item by line, as we will do in our Budget Subcommittee, to really try to determine the efficacy of each of these programs.

And as I'm just really quickly trying to align some of the different material that's here, some of the different graph or charts that are in here to figure out how things are looking, at least maybe on a per unit basis. Mindful that there's a lot of other factors, right? That it's just looking at something only at a per unit cost is not the only thing that we should be thinking about.

But I definitely want to commend Homekey for coming in around $218,000 per unit, recognizing that's not new construction, but rehabilitating stock. Do you feel? Does anybody that could answer this question feel? I know that that came at a moment in time where we had a lot of distressed property that was available to maybe purchase because of the depression that we saw in tourism sector and to be able to use lower-class motel conversion as well for some of these properties. Do you feel like with the market having come back, is Homekey not an effective model going forward?

Yeah, I think it is still an effective model. I don't know that it's as cost-effective as it was, but I think from a speed perspective, it's an effective model. And I think it is definitely worth continuing to fund going forward.

Okay. Thank you for that because. Yeah, that's at 218. Again, back of the envelopes here, I see the HSC program is coming in at know the infrastructure infill grant while it's only coming in at. That's really to offset. I think a lot of the developer fees that otherwise would make it difficult for a project to be able to pencil out. But most of the other programs, which largely are subsidizing the bulk of the construction coming in in the range of 301 to 383,000 per unit.

And again, some of these are collapsed, I think, in these charts that are sort of aggregating some of these programs as well. I'm really glad we got into the tax credit because that's not really described here in the background information. And $500 million a year is a significant amount of state investment.

And so if I'm really quickly calculating some of the numbers you provided, Ms, Ms. Went over the last four years, $2 billion of state investment, where lately we've been doing about 48,000 units of construction over the four years there, prior to that was about 22,000. So I'm looking at was it accurate to say that incentivized 26,000 units of construction that otherwise wouldn't have happened?

Yes. I don't think you can just divide that by the number of units, though. We'd have to go and poll if you're looking at the cost per the investment per unit, but yes, sure.

But that incentive may not have been there for those additional 26,000 units over the course of four years at the cost, at the state cost of $77,000 per unit. That was what we had decided to fiscally give up to be able to make that happen.

I see what you're saying.

Right. That's like the end of the day, I think what we're trying to sort of tease out here, which is why it is the number one issue, as I've talked to my local affordable housing developers, that we've got to focus in on and be able to preserve and also make sure that we're providing some guarantee for ongoing funding, not just in this program, but going forward, so that you can plan ahead three years at a stretch to be able to pull together the finances that you need to be able to make all these projects work out.

In addition to kind of understanding a cost per unit factor, also understanding the rates of oversubscription are important. So if we know that we generally have been getting pretty close to demand on a given program, that's important information. But this other program over here that may or may not be more cost-effective is actually receiving 10 times the amount of demand than we have ever been prescribing.

And that's helpful information for us to be able to sort of weigh better apples to apples, how we are making these decisions between these programs if we have to trade them off. And so I encourage as well, I want to thank the LAO for developing a little bit further and for HCD. I'm going to go check out your dashboard that you would reference as well. All this is really helpful information that helps us to align the critical components of decision-making.

Yeah, we'd love to be as helpful as we can be in terms of helping understand that. I want to make sure you understand the Homekey per unit cost. It's pretty much you're getting that unit for that cost, whereas the other stuff we're leveraging with many more. So you're not getting the total development cost there. The only thing I'd say is, and I tried to get at this, it's assessing the public benefit.

We see significant demand across all our programs, but if MHP is available, that's way more oversubscribed than a more niche program. But if the niche program is the only thing exists, developers are going after that. So we see significant demand even in an era where we have MHP in the more general sources, but it's something to consider. But those other mean more niche programs, you may want to assess what that public benefit return is better, right?

Because if you're serving folks with chronic mental illness at 15% of the area median income, that may be deemed to be a more valuable use than someone, a household at 60% of the area median income, that maybe is just more needing to affordable housing for economic reasons, right. We have a number of folks in those niche programs that are veterans, folks experience mental illness, those sorts of things where we're looking to do a more targeted public benefit, right? For that long-term investment. And so that's just something to consider as you weigh those trade offs.

Fully appreciate that. For CalHome, I wonder maybe back to the LAO, if you could talk about your observations why there was such a slow rollout for some of the CalHome dollars that we put out there, that we have such a large balance still there, when really that should flow, that the programs exist, right. The local recipients that are distributing the grants are there, but yet we still have such a high fund balance.

Thank you, Jenny Pacella, with the Legislative Analyst Office. We defer to the department, but it's our understanding that this money has just not been made available yet. So once that money is available, then there will be applications for that.

I mean, I wouldn't say it's slow. Every year we're putting out CalHome money. It was just we've gotten a lot of CalHome money CalHome seeks to. Every time an affordable housing bond is passed, CalHome gets a pretty big infusion. And so the most recent one in 2018 had a significant amount for CalHome. And then on top of that, general fund was put on by the Legislature. So what we do in that CalHome is pretty broad. We actually put out a homeownership supernova, too.

There is some money for homeownership through our Joe Serna farmworker grant program, too. So we combine CalHome in that, and then there's a multifamily component, often with CalHome. So we actually have annually, and we can give you more data if it's helpful. But annually there is money going up for CalHome every year. It's just we've gotten bigger amounts over the course of the last five.

Understand. Yeah. And for the 311,000,000 that we have put out so far into that program, being able to help 3700 families or individuals with their homeownership opportunities is commendable. It comes in again as a state investment of 84,000. And does that remind me again, that's a grant, right? That's going out the door. That's not like a revolving loan fund?

Yeah, there's a variety of uses in column, so it's pretty broad-based. I mean, you can even fund ADU development, but typically it's going out to grant to a developer or a local government to facilitate that.

One of the challenges that we have with that, again, if I have to start to make some judgment calls, is it doesn't produce a new unit of housing. It does produce home ownership, and that's laudable. And that's exciting. Right? For those individuals that are just looking for that down deposit, which is very difficult to find in a very high-cost of housing market. But it's just.

There are various in the CalHome that do, do production, actually. So we can give you that breakdown post this if you want. But you're right, one of the components is down payment assistance as well. So we can break out that number for you a number of different ways. It does produce new units. It's not exclusively down payment assistance.

Fantastic. And then building off of what my colleague had said before, some of the prevention programs are something that I find we probably need to think about making more investments. At the same time that I'm trying to preserve what's on the chopping block as it is, knowing how cost-effective some of those could be coming from local government had the opportunity to be able to make some decisions with CDBG dollars. Right?

And you knew that that was either going to go to fund some new project, or you could work with a developer to preserve affordability for another 35 or 55 years. And the consequence of that is that you would have maybe a 200-unit building of individuals, very low income, that were on the brink of homelessness. Right? They would have fallen on the streets, they would have been evicted, and then the challenges there, community-wide, would have been that much greater.

So seeing more, and I look forward maybe in the conversations ahead, to understand a little bit more about the prevention programs that have been funded and how we are bang for buck. Being able to support individuals and not see them fall into homelessness, I think is important. Understanding investments, I don't know if anybody has. I saw Ms. Mandolini.

Yes, I just want to comment because I think there's sort of preservation in two ways. One, you prevent people from becoming homelessness so rapid rehousing dollars that a lot of the locals are working with folks to keep them in their house. And so I think that's an investment that a lot of our local governments have been making, I think are really important because, and I don't know if the statistic is correct, but I'm pretty sure Director Velasquez said for every one person we house, two and a half people become homeless in California. And so you really want to try to keep people housed. The other really important aspect of the work that we all do, especially in Eden, because we're old, is preservation.

And so the work that we're doing to reposition existing assets extend the life of their affordability. Super important. Assemblymember Ward, I know you're working on a bill that would allow HCD to help do refinancings and might potentially recycle some of HCD's dollars that are kind of locked into aging properties and create a resource that can be relent to new developments.

So I would encourage you to continue to think about that bill because I think those kinds of low-hanging, easy-to-do things that don't cost you necessarily new money but could help you preserve the stock that we have and upgrade it. And I know TCAC is working on how they allocate more of their unused bond cap for preservation. Super important. It's a really great way for all of us to try to make sure the stock we have stays high quality for the long term.

Yeah. Thank you. And the last thing I'll just kind of note on is that, like my colleagues, and not just through this bill, but for previous bills as well, working with HCD on some of the kind of bureaucratic reforms. I hate to use that as not a pejorative word, but just, it is what it is.

We want to make sure that we're helpful for you and we're looking at the rules that you are really bound by to try to loosen that up so that you can help things flow a lot faster. And anywhere that we're seeing consolidation of effort across those departments or with the treasurer's office, we're partners in that, too, because we want to hear from local developers that we need to have everything at that table. I'd be curious if anybody wants to comment on the supernova process now that it's been up and running for a little while and how that's going.

But in that same vein, how do we continue to get into this spirit of laying everything on the table together and making decisions so it's not something iterative that's taking a developer two or three years to render a decision, but we're getting to a place right now where things can just happen a lot faster and get the resources out to development?

Yeah, I would just building upon that, I think it's really important that the policy direction is very clear. Are we talking about getting units produced as quickly as possible? And if we are, that's how then each of the programs and those that run the programs could be judged as being successful. Right? Or are we talking about leveraging the smallest amount of money available to build that unit and sending the developer to go out and collect five to seven other layers of financing? Right?

And I think that's where we're at. And I think that we have the ability to change that and get units produced quicker. And every time I sit down with a local planning director and they say, well, we've got this much out in housing dollars in NOFA, and it's going to take this long and this long, I think to myself, well, but how many permits have been pulled in the city for affordable housing or even market-rate housing? Right?

And how quickly are those units getting built and what are you doing to expedite that? And I think that there's some low-hanging fruit here that you're kind know, maybe hinting at or working on that I think could go a long way.

Okay. Thank you all. Thank you, Mr. Chair.

Thank you, Mr. Ward. We will now move on to Ms. Reyes.

Thank you, Mr. Chair. I think I really appreciated the comments and the questions from our budget chair or our appropriations chair. Releasing the funds early once awarded by HCD. We know that with redevelopment money, we always knew what to expect. And there's a need to be able to duplicate that and find ongoing funding streamlining. Also, clearly is something extremely important, something for me. And our budget chair talked about this, and so did our Housing Budget Subcommittee chair talked about, and I still don't understand.

This is the committee for accountability and oversight. It's a new committee because we realize that there is money that is going out and we don't have true accountability. And I can tell you that my constituents are the ones that are saying we spent billions of dollars. How many units have you actually built? And that's an ongoing question for me. I still cannot answer that. I was just trying to look at the charts that were provided.

We've got the one-pager that says page three, and then we have from the LAO page four. And just trying to put the two together, the Joe Cerna, the farm worker housing program, a total of 100 million has been allocated to that. And if I look at this, only 160 units have been completed. So if I do the math, it doesn't sound like the same thing of what I'm hearing here.

The other one is the veteran housing a total of 50 million, and we have 415 units that have been constructed. So for me, there's a disconnect, and I know there are lots of other factors that have already been talked about. But what I would like to see is a chart that shows how much money was allocated next to this, how much money was allocated for the program over the six years, because this talks about 2018 to the present, and we're talking about units 2018 to the present. So if we know how much was allocated and then how many units came out of that, that helps me to explain to my constituents what we're doing with our money.

Again, this is oversight and accountability, and for some of it, it is the wraparound services. So a lot of money is spent on that. And we know the 5% administrative fees or 20%, depending on which program we're talking about. But that's important for me to be able to look to see what money has been invested and what the rate of return, just like my colleague has talked about. What's the rate of return on the return on investment then?

For me, just as an individual Legislator, I'm able to look at this and say, oh, this is one we should invest in because I know that you all are going to protect all of the programs. And I get it and I heard it in the responses, but I think to make those decisions on which programs we need to move forward with as our budget chair asked about earlier, we do need accurate and honest information, and in a way that for somebody like me to be able to see it on a chart, this is how much we invested and this is what we got in return. I recognize we need additional federal funding and the leveraging.

I understand that, not completely, not like some of my other colleagues, but I understand that. But I want to know what we've invested in each program and what the rate of return on that investment has been and how we can better evaluate as this Accountability and Vversight Committee. That's just my comment and something that I would like to see in the future. Thank you, Mr. Chair.

Ms. Reyes, thank you for reiterating that point and the purpose of this committee. It means a lot, and we'll stick to that. Thank you.

Thank you.

Moving on to Mr. Juan Carrillo.

Thank you, Mr. Chair. You know, for as long as we continue to insist that affordable housing should only be built in the Bay Area, Los Angeles, San Diego, Anaheim, there is just no such thing as affordable housing for very basic principles. The cost of real estate. When you look at building these multifamily projects in those cities that I mentioned, real estate is expensive. There is no vacant land. You have to acquire parcels that have already been developed with buildings on them. What does that mean?

You have to tear them down. That has cost. Even if you reuse existing buildings that are built for commercial or industrial, they don't meet the building costs for residential occupancy. So that's another cost. So for me, again, as long as we continue to talk about affordable housing in these urbanized areas, it's not going to exist. Areas that I represent, the High Desert, Palmdale, Lancaster, Victorville, Hesperia, Adelanto. People are still coming up there to live. They're still buying homes that are 400,000, $500,000.

It's still expensive, but yes, more affordable than LA, because in LA there are $1.0 million homes. So for me, again, as long as we continue to believe that we'll be able to build affordable housing in those urbanized areas, we're not going to meet that goal. We in the High Desert, again, keep getting people coming up there and developers want to develop there, but the financing is not there because banks don't believe that the market exists there. With that, there's other challenges.

I realized that bringing people to the High Desert or even the Central Valley of California, we need to also invest in transit, public transportation, better means of letting people go to where the jobs are. We need to get more jobs in those areas, too. So very respectfully, as long as we continue to have these conversations of affordable housing where there is no real estate available in those cities, LA, San Diego, Anaheim, again, all of those areas, we're not going to meet that goal.

I think that we need to invest in areas that are growing, not only in housing, again, because there's other challenges bringing people to where the jobs are our budget shares. What can we do to get the most benefit with the limited resources that we have? To me, one of that is where land is available and more affordable. Again, when those developers want to come to develop in these areas that I represent, they don't get the financing.

And I think that also puts us at a very big disadvantage because the points that are assigned for development through HD or other means of financing puts us in a very big disadvantage, which is don't qualify to get those dollars that are available that are very, very competitive. Those are my comments. Again, I just think that we need to realize that affordable housing is one thing, but when we look at the cost of real estate, we're never going to get there. Thank you, Mr. Chair.

Thank you, Mr. Carrillo. Really appreciate your tenacity and advocating for your district and other parts of the state that sometimes do get overlooked. And housing is a statewide issue, so we have to approach it just that way. Moving on now to Mr. Patterson, Mr. Patterson.

Okay, any other colleagues that have some questions at this time? Mr. Lackey?

Yeah, I don't really necessarily have a question, just a comment before I depart that we talk a lot of being proud about the streamlining that's been done. And I would say that when it takes over 600 calendar days, just for permitting, we can do a lot better. And I think that that is really, we've bannered back and forth that time as a benefit. Well, time equals money.

And so when money is so scarce at this particular time, we should be doing more on this because I do believe we're overregulating, well-intended overregulating, but we need to chop it, and we need to streamline the timing because we're in control. We're the ones that make these rules. So we're the ones that actually need to be doing the haircut. So I want you to know that I see it that way, and I thank you for the information you've shared with us.

There are some things that need to be done right away, and I think that this regulating is one of them. And the streamlining, we've gotten bright enough people that understand where these can be done, where these efficiencies could take place. And I hope that we have the will to do that, especially now that we have this big motivation with our budgetary crisis that we're facing. So thank you for all your time today. Thank you for the remarks. It was very enlightening.

Thank you, Mr. Lackey. Thank you. Now back to our Subcommitee chairperson, Ms. Quirk-Silva.

I wanted to refer to the handout. I'm assuming that you all got this on the budget, the governor's proposed budget cuts. Did you guys get that handout as well? Yes, and it's on page five, and it's the governor's proposed budget cuts. There are several programs that are proposed to being cut. We know that with the numbers coming in from the budget that there are going to be indeed cuts. There may be programs that are not even listed on this that could be cut.

In addition, do you have any comments or thoughts on these proposed cuts? And I guess, putting you on the spot, is there any program that you would feel confident enough to say, I think we could delay this or cut this, because that's in fact what we're going to be looking at doing very shortly.

We do have another hearing on April 9, if you're not comfortable saying that today, but at least getting us information of other programs that we're going to have to look at under housing that are going to have to be cut. Any comments?

Yes, thank you. So I think you go down the list, and I don't know that I have exactly what you're looking at, but the state tax credits, the IIG program, and the multifamily housing program are really the key programs for production, in my opinion. Now, we have done quite a bit of housing for veterans and we've utilized the VHHP program, but with the support of the state and local government, now this is just Orange County.

We are reaching a situation where we have housed our homeless veterans in Orange County. So that program has been very effective and useful. I know that's not the case in other counties, but potentially that could be folded into the MHP program. Again, kind of simplifying and be a subset of. So that would be my comment. Looking at those cuts.

Can you just repeat, you said tax credits?

Yeah, the state tax credits, the infill infrastructure grant, and the multifamily housing program, I think are your core production programs that we utilize throughout the state. Thank you?

And I would just add to that, I mean, depending on the fate of Prop One, some of these programs, like the navigation program, I would have the question, if I were a Legislator, about what could Prop One, if it passes and that's on this list, that you could maybe put a pause on it and wait and see what's coming out of that. So housing navigators is one I know a lot of our local governments are using.

So it's a small program, relatively speaking, in the state budget. But I do wonder if Prop One does pass, whether there's some opportunities to move some of those programs into that funding.

We would just add on that the governor's budget proposes one package of solutions. Obviously, you have different choices you can make. I think in addition to the things you've heard today, one thing our office has said is to look at those programs where the funding has not yet gone out, new programs, one-time funding that might be somewhere to also look.

I think the point I would like to make is that at CDLAC, we allocate federal taxis on bond financing that is used for a variety of different resources. It can be used for multifamily housing production, single-family exempt facilities. And when we look at prior to 2020, we really struggled at allocating those resources fully. And it wasn't until we had additional state investment coming in in 2020 that suddenly that program actually became highly oversubscribed.

And that's what caused us to be able to double the production of new affordable housing units throughout the state. And so I think what I would want to impart on you is that the programs, both at CDLAC then with the tax credit allocation committee, these are federal resources. But most of those resources require additional state dollars in order to truly leverage what we're getting from the federal government.

And the concern I would have as lawmakers is kind of what I mean, I'm not a lawmaker, but to think about is, will we be underutilizing federal resources by not funding some of these programs? So that's an important thing, I think, to consider in making the tough choices that you and the governor need to make this year.

Wonderful. Thank you for identifying that point. We have to maximize the resources that we have in addition to collaborating and joining as many resources as possible to make sure that we're addressing the housing crisis as effectively as possible. Now back on to our budget chair, Mr. Gabriel. Okay.

Thank you very much, Mr. Chair. So, I just wanted to ask a couple of questions, and thank you all for your insight. We very much appreciate it. And I guess, first, let me just make a comment, which is that thank you to our subcommittee chair. I also, as I mentioned at the offset here, have a lot of concerns about some of the proposed solutions that would involve cuts to our housing programs, and understand that we may have to make some very difficult choices.

But I think Ms. Wiant made an excellent point about are we leaving federal dollars on the table and what are the wisest choices we can make? And also just mindful of the fact that I worry that cuts in this area might be penny-wise and pound-foolish. Right?

That we would be saving money on one hand, but our expenses through social services and through Calworks and through other, all kinds of other expenditures would go up. So I think that that's a conversation, obviously, that we need to have with our partners in the Administration. I know that they're thinking about the same thing. If we're in a difficult budget, there might not be a lot of good choices.

But I just want to make sure that we're thinking globally about all of the impacts of the choices we might make. And that's why these proposed cuts to housing and homelessness programs give me the most heartburn, I guess, is probably the way to articulate it at this moment. I'm curious to get some thoughts from the panel about local government and the role that they play in this process.

One of the things that I have sometimes worried about is that a lot of us are trying to row in one direction up here, or maybe I would say, pedal in one direction. And then we have folks in some of our local governments who are pumping the brakes and actually potentially undermining some of the policy choices that we're making or making the investments or counteracting some of the investments that we're trying to make to address these issues.

So this is just an opportunity for any of the folks up there. If you have thoughts about how we might address some of those situations and how we might think about it, I'd love to hear your thoughts and feedback, particularly from the development community.

Sure. I think local government obviously plays a key role in the success or not being successful in housing development. And there's many ways that the state can incentivize local government to come to the table to help find solutions. But I also think that one of the things that redevelopment did well was it tied together economic development with housing. And when we talk about, like, the Antelope Valley, I mean, it is prime for economic development.

We recruited Lockheed and other jobs up there and then we paired them with housing programs. So bringing that together. But I think that the other point here is we are looking to our local agencies, our counties, to pass bonds. You see, counties that do pass bonds are more competitive at getting the state money. So just like was mentioned earlier, in order to get the federal dollars, the state needs to put money in. It's the same with the counties.

The counties stepping up and putting money in will be able to bring more dollars to the table. I appreciate your comments on all roads lead back to housing. We talk about that at Jamboree, that if you care about education, then you got to care about housing. If you care about health care, care about housing.

There's some really good data out there that is supportive of this, that you're going to see increased police costs, increase in healthcare costs, increase in school delinquency and truancy if you don't have affordable housing. So maybe there is a role for continued education from the state level as well as the housing element work, that's being done is so much better than it was in the past, right?

Holding our cities actually accountable to have a housing element that's identified, sites that are real, sites that housing could be built on is huge. And I would just end in closing because we probably are wrapping up is just on a personal note. So I have a young son who is 23, who is a brand new police officer in one of the largest cities in Orange County.

And in talking to him as he's going through his training, 90 percent of his time is pretty much spent on calls for trespassing, loitering. He's encountering homeless folks, folks with mental illness and addiction. And so we've got to address these issues because the cost, think about law enforcement., the cost of law enforcement are housing these folks in jail or in prisons. That has to be measured and put out there when a housing development comes forward.

Yeah, I appreciate that. And I would just add, if you care about climate and environment, then you should care about housing. Right? People who have super commutes that are driving two and a half hours each way to and from work, putting carbon into the atmosphere. I think as an environmentalist, housing has to be a top priority as well.

Absolutely. Thank you.

Thank you.

Can I just add on local government, I appreciate all the work that everybody's done on streamlining. I can't understate how important that has been. I also appreciate the Surplus LandAact and the ability to do projects in particularly difficult to develop jurisdictions. Eden, in concert with Thompson Dorfman partners, is doing the San Quentin shooting range site. That's a state site that was done in the surplus land, and the state zoned the site at the state level.

So President pro temp McGuire was actually ahead of our zoning hearings, which was quite helpful to us. And so I would actually think about, is there a way for us to opt into state zoning on a site that's really hard to get approved? Is there something we could do? And it's not because councils don't want to approve it. It's just that years and years of getting things done just difficult in some difficult-to-develop areas.

I know it's probably a crazy idea, but I had to put it out there. I also think local fees remain a bit of a heavy lift in some jurisdictions and also special jurisdiction fees. So building a whole new sewer system in the city of Richmond is really a heavy lift for a 50 unit project in that city that doesn't have a lot of resources. So I would just look to how much is being exacted out of any single project as a place to continue to look.

And then last but certainly not least, I cannot understate how important ACA1 is going to be for local initiatives if the locals can't raise their own money, and two thirds is, outside of San Francisco, almost impossible. So really being able to get a 55 percent vote on local initiatives for housing funding is really important for us.

Thank you. And I appreciate again, all the efforts that you have done to improve housing situation, including being able to speed things up by reducing the time frame. But let's just talk just big picture about housing element process. So HCD has done a great job to try to improve that process. But you got an eight year cycle. So if you've got a willing property owner willing to sell your property, it's about two years to get through the entitlement process.

Even if you're zoned, it's about two years. Then it's about another two years till you can start construction with plan check and design and back and forth in districts and all that. So by the time you get your, this is to say a market rate project, but it could have been for the housing project.

By the time I've got my subdivision built, my models under open and people willing, it's six years out of an eight year cycle when people show up to buy the house and that's a willing seller. So it's really important what Laura said that we have a housing element process that identifies sites where the property owner is willing to engage and transact. That's huge because you don't have a land sale, you don't have housing. That's number one. The delays in the process fees are really important.

I mean, you're talking big picture. Where can I be effective? So the fees, the ability to go to certificate occupancy is huge from a cash flow standpoint, as you can imagine for people. And the fees keep going up. They keep going up despite the fact that our homes are way more efficient, energy-wise, water-wise, everything. But we're paying more in fees. And I'm paying the same fee for a 4000 square foot, $2 million house.

I'm paying that same fee for a 2000 square foot, $1.0 million house. It's the same fee for water and sewer despite the different use. So that's important from a cost standpoint, especially for multifamily projects, even though there's different fees, you know, they're still a little bit out of bounds. And I think the regulatory process, I don't know.

I mean, we met with Gavin Newsom when he got elected at CBIA's office to talk about housing when he said he was going to build three and a half million houses. And we started kind of saying, hey, this, that, the other thing. And he was like, wait, guys, really? But apparently, the regulatory agencies never got the message that there was a housing crisis because they keep turning the screws and squeezing us.

I just spent, I don't know, $2,000 a unit for a small portion of a project that had to go to the 2022 energy code, $2,000 a unit just to design, go through the plan check process, and another $5,000 a unit to save the tiniest more amount of energy. It's insanity. And that goes for every housing project that gets built in the state.

And Mr. Grayson has a bill up this year because of the water board in San Francisco is making it impossible to build multifamily housing in dense locations for a water quality situation. So all these things, this is the big picture. There's places everywhere we can help reduce the cost and the time delays and deliver more affordable housing. Thank you.

Thank you very much. And I didn't want to leave Mr. Olmstead out of the conversation. Know, feel free to answer now. If not just something, if you guys want to think about it and get back to us. Something for y'all to think about. I'm just curious, what are the key sort of data and metrics that HCD uses to evaluate the effectiveness of programs? Again, getting back to what for me is sort of this essential question, as we may have to make tough choices.

You talked about the dashboard, and I'm going to go check that out. But what are the things that you would point us to that are, I guess, salient in your decision-making and that you think we ought to consider as we're comparing different programs and different budget investments and trying to figure out where we can direct scarce resources to have the biggest outcome?

Yeah. Thank you for the question. Obviously, that's when you could have a whole hearing on. Certainly. But I think the impact is quite critical. Right. We share the desire for speed and production. Right. I do think, and you've heard me say it a couple of times today, not every program is equal in terms of that public benefit. I appreciate a lot of what you said about housing as a climate strategy. We believe that. Right.

Every new home built is a climate friendly home, which is with how we have to do multifamily, single family, what have you. Right. So that is actually quite critical to the state's climate strategy as well. So obviously, if you look at a program like the affordable housing and sustainable communities program, it's not just the production there, it's where we're building the housing. And what benefits are you getting at it from a public benefit standpoint, right?

If you look at a program like Homekey or No Place Like Home, we're impacting homelessness directly there. So obviously there's an overarching kind of North Star around the production generally because all of our programs on the production side do that. We want to get our money out quick and effective. You've heard that sometimes can create some other challenges on the back ends. But generally speaking, to try to answer your question, that's kind of the North Star in terms of actually getting our funding.

We're implementing the programs that are given to us by the Legislature, right? And for the most part, the goals of those programs are the production of the units. And so it is quite important that we get to that eventual production, that construction piece, right? You can see we're on the precipice of a lot of housing coming online, right. We have a lot in construction right now just from those states' affordable housing benefits that are partnering with the tax credits and bonds.

So we're about to see some nice infusion there, but our need is so much greater, right? I've heard a lot about land availability. We're in the process of doubling the amount of land available visa vis all the local government's housing elements. $2.5 million have to be zoned for, right, that's double the amount of land that is available, but $1.1 million of those have to be for affordable housing, right?

So you have to tackle it from a number, that production kind of North Star from number of goals. But if we're given a program, we want to get that funding out, get those housing units built, right? That is kind of what we want to see. We want to see those go from that kind of first award into the production. And of course, when that happens, that is one metric of success, certainly. But you also hear me talk about that long-term impact, right?

We want to make sure everyone understands, like, yes, this can cost a lot at the front end, but we are getting that benefit for many, many people over time, right? And that is impactful as we build a portfolio within the state, we need to keep building that portfolio and we need to do it faster. Right? I know Assemblymember Wicks left, but like, and I think some of the colleagues have talked about here, we've had death by a thousand cuts for decades, right?

A project comes, it's 100 units now it's 90 units now it's 80 units if it gets approved at all. And then it costs a little bit more because you're going to layer these things on. And so we need to get at that. And so we also take at it, that's why I mentioned the accountability work that is important, signaling work that we do. We want to make sure if the project should be approved, it's approved.

We've already unlocked and that we can do on the market rate and affordable sid. And we're hoping local governments, as these laws start to, some of them go through the courts, quite frankly, where we keep winning on those sides, right? We hope that signaling continues so we don't have that log jam, back to your question at the local government, because even though, if we have unlimited funding, we do see some delays there. So that is kind of North Star. We'd love to talk more about it.

Certainly, I think you saw one table pulled out that's from a much longer document that goes more in depth on our program. So I'd encourage, that if you want to share it with them, we can certainly answer any questions you may have from that and then continue that conversation for sure.

Yeah, thank you for that. I guess, just to further sort of lay out my thinking, my sense is that the most successful and sophisticated enterprises these days, whether they're sports teams or businesses or folks operating in a whole brand of sectors and industries, are using data to their advantage.

Right.

And they're understanding, using that data, understanding exactly what is driving success, what is driving outcomes, what is moving the needle. And I would love for the state to be in a position as we're allocating the people's money. Right. The money that the taxpayers have given us and asked us to use to solve these challenges, to have a really good sense of which programs are most effective.

And I think you raised some really important points for us to consider about how we think about that over time with units, about the different policy choices that we're making as we're looking to serve various subpopulations. Those are all really valid points, but I think, at a higher level, I would love to have a more data driven conversation about how we might target those investments. I think that would benefit all of us. Well, I think that would help us to get the results we all want.

I see. This is a team sport, right? We're fundamentally all on the same team here. And the question is, how do we change what we're doing? How do we adapt what we're doing to meet this moment and to address the very profound challenges we have? And I just want to thank the panelists for sharing some of your expertise with us. I think the door to the Legislature is always open. We want to understand from you, I don't sit around and look at pro formas all day.

I don't litigate CEQA cases. I don't go out and seek private investment. I don't have to deal with local governments and deal. So you guys understand the nitty gritty of this in a very different way than we do. And what we're looking for are what are the most impactful policy changes and investments we can make to help you, to help all of you do your jobs. And that goes for whether you're on the public side or the private side here, affordable or market rate.

We're all on the same team here, fundamentally. Again, keeping in mind this challenging environment that we're about to enter, what is the Low hanging fruit? What are the policy interventions? What are the investments we can make? That's what. I'm grateful that we had the chance to begin that conversation today, but I just want to invite you all to continue that conversation. We are eager to work with you on that.

Thank you. Chair Gabriel and I can relate and attest to the importance of teamwork and collaboration. We're in the middle of this game, right. And sometimes the plays that we had planned aren't working out. So now we have to call an audible and we're going to go with a play that has yielded us the best results. So I think that's the concept of today's hearing as well. So thank you for that. A couple of closing questions for me before we move on.

A majority of California's tribes have had some challenges accessing some of hed's programs. Can you please elaborate on how H d is ensuring that tribal communities are maximizing the benefits of these programs available?

Sure. I mean, we've been really proud of the ability to help a number of tribes. We've put out specific notices of funding availability for tribes, and we've left those open. Right. They're not like time limited. We've funded a number through Homekey and even our supernova now. And we've luckily, thanks to the Legislature, we're given some flexibility within our ability to waive certain rules that can sometimes be problematic. So we're working through, and we try to work through those with tribes, a lot of technical assistance.

We have different units within our Department that actually are specifically targeted towards helping tribes get through those complex programs. So how we tackle it is essentially setting aside some of those dollars just for the tribes and then putting, as we have a number of workshops that are targeted to tribes that have done a lot of work directly with them. We have been able to make a number of awards across some of our programs.

So happy to give you more of that information and data, and obviously, there's more to do there, but that's how we've kind of tackled it. And then we have the ability not to waive a number of rules given some legislation that passed a couple of years ago in the Legislature.

Thank you. And I would encourage the proactiveness to continue. And my last question, to touch on the supernova topic, I would appreciate maybe some General thoughts or direction in terms of improving the process.

Okay. I mean, we've had two rounds from the first round. The second round, we were able to make a number of changes and improvements. It's very oversubscribed, as you can understand. So we have, I think, already the ability to kind of iterate across rounds and make improvements. I don't know. I could be opening up for the wrong thing, but I don't know if the developers at this table think it's gotten any easier from round one to round two.

We hope it has been, and certainly there's some tweaks we would make, too. There's a number of technical things that make it quite challenging embroidering all those funds, because it may seem like a little streamlined and simple, but we are still subject to some of the rules, like the veterans program is in that supernova. Right. So if you're accessing that, obviously you got to serve veterans.

And so there are some additional things that we hope have made it a little bit easier, but we think there's still some ways to go. I mean, consolidation seems great and it is great. We want to do more of that, but we don't undo kind of all the rules of those underlying programs still when we do it. So it still is complex, I think, but I don't know if we can reduce all that complexity. But we're certainly always open to ideas there.

And we have, from round one to round two, made a number of changes.

Thank you. And developers, if you can all chime in, I'd appreciate some candid responses.

We're only on the second one. We went one for six in the first one, and we still don't actually know how we're doing because the second one hasn't been announced yet. We have, I think, 11 projects in this round. I'm sure we're not going to get all of them. I think this question is, the demand is far outstripping the supply of subsidy dollars is the first challenge, which is why I would encourage you to think about at least funding MHP.

But going back to the earlier comment, MHP and IIG don't prohibit you from funding these other separate things. And I think that's been part of the challenge with the supernova. So if you don't have a tranche of units for vets, then in the first round you didn't get funded because VIP ran the whole program.

So I think we've been learning as we go, and so I think the more you can make the supernova about a General program that might have some percentage targets in it, it might get a lot easier to actually be successful or streamline the way the process works. And I would guess make it easier for HCD to score the programs because you got so many slices that you're trying to score for that. It's really hard to expedite that kind of a scoring process.

It takes a long time. Putting more into an MHP bucket probably makes life a lot easier on both sides of the table.

Underlying it, we've moved the language and I think this is quite important. It seems like a small tweak because we use them interchangeably, but a set aside is just like another new program, really. So we moved it to targets. Right. We're trying to Fund community based developers and emerging developers. Right. But it's more of a target. So to the degree we have applications, great, we'll hit that target. Same with the geographic targets. Right. We hit those. That's usually not a problem.

But within all the stuff Linda was mentioning, the first round had a lot of rigidity. And so if a project didn't kind of fit those buckets, we've tried to soften that a little bit by seeking out targets as opposed to a set aside, which is essentially just a sub program that makes it even harder almost to manipulate.

Yeah, I think those are great points. I would just caution the measurement to be over subscription because we're all very optimistic developers and we're going to throw in to everything and see what we get. I would definitely measure it on allocation and projects moving forward quickly because early on there were some projects that just were partially funded and then they had to wait a year, and then you had to wait that next year as described earlier.

And it's time is money and then you can't keep your site. And we know sites are challenging, so definitely some more work to be done.

I'd like to make a related comment. So, like I said, I work for a small, privately held home builder. Used to be a lot larger. At the peak, before the recession, we were probably doing 150 to 200250 units a year. The recession changed a lot of that, as did the banking regulations. So we're shrinking right now and we're going to go away.

And so for us, it typically takes, if you look at the Bay Area project, might be $100 million to buy the land get it entitled, develop it, build your first phase and your models. It's not unusual. We'd have to Fund about $30 to $40 million that in cash. That's a lot of money to throw into one bucket for a small builder. So there are fewer and fewer. There's hardly any privately held home builders in the Northern California Bay Area. Used to be a lot of us.

There's hardly any of us left. Right now, mostly public builders are taking over the market. They're good builders. But I'm just saying there's a segment of the market that's been killed by the financial regulations. You can't do it with your own money anymore. You have to go to institutional money, and to go to institutional money, you have to get really big and change the way you do business. So that's something to keep in mind because it's part of the housing equation in California.

Thank you. One last comment.

Yeah, just one last comment. A lot of this, and I appreciate the discussion today, and a lot of the conversation has been like, number of units produced? How much does it cost?

And I just want to take a moment also to think about the families that we've been helping over the last four for the history of the program, but also, in particular, looking at the numbers I have in front of me for the last four years, more than 25 percent of those units that we've produced have been for extremely low-income households. And what that means is I'm looking at the Orange County numbers that ends up being a rent savings benefit for that family.

I'm looking at two bedroom apartments, $1,800 a month of rent savings if being in one of a tax credit unit, compared to renting in the market. So that really has such a multiplying effect for that household in so many different places. And so when we're looking at sort of, is the program effective or what is the cost benefit and return on investment? The impact to those 20,000 plus households is huge. And just wanted to bring that one perspective before we close today.

Thank you. And that perspective is well received and heard, and I have no doubt that the investments that the state has made are helping Californians. But considering the budget dynamic that we're in now, it's incumbent upon us to really step our game up to ensure that we're maximizing those dollars. That dollar that yielded 30 cents worth of results, and I'm just using general numbers, needs to now be as close to that dollar as possible.

So I want to thank all the witnesses and members for their participation today. We've definitely learned a lot, asked a lot of questions when it comes to the development of affordable housing. A lot of pros, a lot of cons, some things that are working, some things that aren't working as well as we would like. I am confident that this conversation will continue among colleagues, and then, in addition, in our subcommittee hearings to examine the proposed cuts by the administration. I'd like to close with this.

We discussed the target of 2.5 million homes in the State of California, with 1 million of those being directed towards affordable housing. And then we also heard a number, a relatively small number, compared to that 1 million number, 57,000 units have been made, been developed thus far. So I really want to challenge us today to ensure that the policies, the programs that we're going to all be advocating for are yielding the best results intended.

To close again, this committee is intended to ensure that dollars are maximized through oversight and accountability, and it's pertinent now more than ever that we ensure that. So with that, thank you, everyone. Have a blessed week and hearing adjourned.