Assembly Budget Subcommittee No. 5 on State Administration

Good afternoon. Sorry for a little being tardy here, but welcome to Assembly Budget Subcommitee Five, informational hearing on housing and Proposition one, titled from surplus to shelter. I like that title. Transforming excess state owned properties into affordable housing. Today, we face a stark reality.

Over 180,000 Californians are experiencing homelessness, with the vast majority grappling with mental health conditions or substance use challenges. The Governor recently issued an Executive Order to address homeless encampments urgently and with dignity.

While we know these encampments pose serious risks not only to those residing in them, but also to the surrounding communities, we must confront a hard truth. Implementing sustainable solutions presents significant challenges. Simply moving individuals out of encampments raises critical questions. Simply, where are they going? Who ensures they have a safe place to go?

We need a holistic approach, permanent housing, mental health services, substance abuse treatment, and job training programs. We must leverage all available resources and develop a comprehensive, long term strategy to not just move people, but to help them rebuild their lives. This has been a key priority for this Subcommitee.

In March, California voters took a decisive step by approving Proposition One. This measure not only amends the Mental Health Services act, but also authorizes a 6.4 General obligation bond. These funds will be used to build housing for those with mental health, drug or alcohol challenges and to create facilities for a mental health care and substance use treatment.

This hearing is an opportunity to examine both current and future efforts to address the housing crisis. We will first look at current initiatives to turn excess state lands and unused state offices into housing.

We will also receive an update from the Administration on the implementation of Proposition one, bond funding for supportive housing and mental health and substance use disorder treatments.

With our first panel, we're going to go ahead and call them up, and while they are coming up, we are going to welcome our fierceless leader in housing, our housing chair, Mister Chris Ward, Assemblymember. And if you want to make any opening remarks, you're welcome.

No thanks, appreciate it.

Okay. All right. With that, we're in this very cozy room.

Our first panel. We are joined here by Jason Kenney, the Chief Deputy Director at the Department of General Services. Welcome, Jason. Megan Kirkeby, Deputy Director of the Housing Policy Development, Department of Housing and Community Development, better known as HCD, and Danielle Foster, Executive Director of Capital Area Development Authority, CADA.

This panel will provide an overview and update on the state's effort to turn excess state owned properties into housing and an update on adaptive reuse project. We will also receive testimony from CADA regarding a Sacramento housing project completed on exit state land.

And I would just ask, as you make your presentations as we all speak kind of an internal language using words like HCD and CADA, and not everybody knows what that means. So if you're going to use an acronym, just make sure you explain that. But welcome. And you're welcome to begin. Yeah, the mic needs.

I think you need either mover or is it on?

On. Okay. It was not on. All right, start over. Jason Kenny, Chief Deputy Director for General Services, appreciate the opportunity to present here today. Your staff did an excellent job summarizing the excess sites program and kind of our approach at present at adaptive reuse in the materials.

But I will cover both of those and kind of the highlights as to where things sit. With that, I'll cover them separately with respect to the excess sites program.

When Governor Newsom issued Executive order N-06-19 in January of 2019, it was the first time that state government attempted to redevelop state property for affordable housing at any sort of scale. After the 2019 Executive order was issued, we did a comprehensive inventory of state property, got to work on redevelopment.

I will be the first to admit that we were building the plane, are building the plane as we're flying it. But we did redirect our surplus property units, HCD redirected staff, and we began redevelopment.

Our record so far we are proud of the background material lists 20 projects, which is accurate if you look at it from a land perspective. Like, you know, one property is awarded and being redeveloped. If you were to count the number of standalone developments on those sites, it's closer to 38.

So depending on how you want to count. But in total, about 4850 number of units that are in development and that totals about $2.5 to $2.7 billion in work. We have also, with the help of this Subcommitee, created a permanent operating fund for the program by leveraging state lease revenues.

So this program is safeguarded against future budget shortfalls. We've also, as we've been leaning into housing more and more, we have begun to partner with entities that we normally have nothing to do with in terms of redevelopment, including the CSU system.

So we have a project right now in San Jose where the University there is preparing to demolish a DGS office building and build much needed faculty housing for both the school and the region.

We've worked with the Legislature, again including this budget Subcommitee, on site specific pieces of legislation to sell properties in a housing centric way, including directing local governments on entitling properties via specific plans that in my experience has never been done before.

If you count those last two, that's another 35 to 45 hundred additional units that are being created as a result of this administration's efforts. We have completed and made public the results of a second comprehensive review of state property, and that is now available on our website as well.

Of course, these projects, being affordable housing by their nature, are entirely dependent on subsidy, and that really does drive timeframes, difficulties and durations for completion. And we'll be the first to admit that some of our developers have struggled in this hyper competitive environment.

But I do think the record shows that there has been a tremendous amount of focus, progress and innovation shown by our respective departments in implementing the Executive order. And I will say the codification of the Executive order, which the chair is very familiar with. Now in terms of adaptive reuse, as an update there

this is a related sort of subset of the excess sites program. It may be helpful to begin by noting that if you were to look at some sort of like 3D model of every piece of state property, right, right now, you would see that the vast majority of that is open space.

And if you were to look and sort of filter down to just the properties with buildings on them, you would see that the vast, vast majority of those are single story buildings. Think field offices, Highway Patrol offices, DMVs, EDDs, those sorts of things. You also have prisons and state hospitals and developmental centers and the like.

But those are far rarer in the, in the panoply of state property. So what that really means is that for the vast, vast majority of state property, adaptive reuse is effectively a non starter.

But that said, in 2020, right after the start of the pandemic, while no one could predict what was going to happen on a long enough time frame, we still can't. We realized it was probable, at least, that some of our buildings would prove unnecessary even if the state transitioned away from emergency telework simply to hybridization.

So we commissioned a study of three office buildings in Sacramento, and the goal was twofold. First, to identify whether or not those buildings themselves would be quality candidates for adaptive reuse. But in investigating that, we wanted to understand what made a building suitable for reuse or not. At the conclusion of that study, we also surveyed the marketplace.

And what we realized is that there were a number of design firms out there who were creating products that allowed you to sort of quickly assess maybe a region, a portfolio, really, really high level thumbs up, thumbs down for adaptive reuse in buildings. But nothing got in between that and a super granular infrastructure study.

There was a gap in the marketplace. And so we use the lessons learned in 2020 to Commission an adaptive reuse tool that we still think is the first of its kind that leverages the findings of those studies. In 2022, Assembly Bill 2592 was passed, which required us to look at our buildings for adaptive reuse potential.

In 2023, we received funding to further evaluate buildings beyond the three that we initially studied out of our own support funds. That year, also we, not coincidentally, awarded those three initially studied buildings to a developer for adaptive reuse. Ss part of the 2023 dollars,13 buildings were evaluated.

We selected them in part because of their potential to be excess, but also because if we had, say, three buildings in a region, and hypothetically, if we knew that maybe we were going to give up one in the future, we wanted to know which ones were going to be adaptive release, adaptive reuse enabled to prioritize getting out of that building as opposed to the other ones.

So of those 13 buildings, ultimately 10 were determined to be unsuitable, three were determined to be suitable for a variety of reasons. But in sum, as it stands for adaptive reuse, we have three buildings awarded.

We know which one of our buildings in our portfolio would be best converted if they were to be determined to be not necessary. And we have a rapid assessment tool that we deploy anytime we make a business decision about the reuse of one of our buildings in the future.

I am sure that everything I just said prompted a ton of questions, which I'm happy to answer in due time, but I'll turn it over to my colleague at HCD. Megan.

Thank you. Thank you so much for talking to us about this today. And we obviously like sharing. It's a little point of pride, I think, for Jason and myself, the work that we put into this. So HCD partners with DGS on this, we function as the affordable housing experts in this partnership.

And so we're really there helping look at how does this land play into all of the steps that make affordable housing come to be. And so our role in the access sites is to make those partnerships happen between the affordable development community and these sites. But also we're a big part of evaluating the portfolio.

So the proposals that come to in front of us, and so the excess sites work, we require that at least 20% of the total units on any of these, these state land sites are available to lower income households. So that's where the wonky terms get started. But that's what we call 80% area median income and below.

So basically those that are below the middle part of the market and there must be 10% of the homes have to be affordable to those households that are very low income so at 50% of the area and median income, or about half of what the middle income for that.

Are those combined, though. So if you're saying

Those are in addition to. So those are in addition to. And it doesn't stop there. The selection process that we use our top priority in that is financially feasible developments that have the greatest depth and breadth of affordability.

So at this point, we've never had any developments come forward to us wanting to be below that. They've all exceeded that. So the average. The average of all of our units combined is 47% area median income.

So, like that, like the sample person we'd be serving makes about half of what middle income would be for whatever community it's in. And we have 953 of those units that serve lower income households. We have 600 of those units that serve the extremely low income household dynamic.

And then 224 of those units are directly serving, will directly serve an individual or family that is coming from experiencing homelessness. And so these developments are happening all over the state. And I really see this as us having skin in the game as a state.

Like we are saying, you're always gonna need multiple financing sources to make an affordable housing development come together. This piece of land can function as one of those sources, and that is going to stretch all those dollars we have in the other places just that little much further.

And we did something creative, I think, through we created the local government matching grant program. And what that allowed us to do was sort of encourage further partnership here. So we said, for those. Those developers that. That have been awarded these sites, we know you're off going and seeking your financing.

We know you still need to get there. And so the local government matching grant program worked where we said, if you can work with your local government to bring something else to the table, we'll match that.

And we weren't saying that that had to be dollars, because local governments can encourage housing to happen in a wide variety of ways. So that could be deferred fees, it could be donated land. Daniel Foster is one of our success stories there from her prior life, and it could also be funding.

And so through that, we were able to encourage even more sort of like expeditious getting along the line in that way and sort of model the way, I think, for our local government partners, showing what it's like to sort of approve these things quickly, get things together.

And, you know, we're now at a phase where Sugar Pine Village in Tahoe, its first phase is gonna be move in ready before the end of the year. Our Riverside Mulberry senior development and our local here, Sacramento, 44 Arden Way apartments are both breaking ground and beginning construction right now.

And we were thrilled beyond belief to have four more developments just last week be awarded tax credits, which means they can move to this final phase of closing their loans and breaking ground. So those are all big pieces of puzzle for us.

And just the last piece I'll add to the map that we're so grateful to chair for is that HCD really took a special role in the map this go round, and we applied all of the affordable housing finance criteria there

so we know that the sites that were added to the map here are not just good from a development perspective of housing generally, but they follow the policy principles that our affordable housing programs require. So we know they're set up well to be successful there, they need to be near transit, near amenities, that kind of thing.

And so we were to your district, Madam Chair, there are three new sites that are added to the map, post that analysis. So that's something exciting that we're working on. And we love the partnership. We want to keep doing it.

And like I said, we think it's an important role that the state play and showing we're willing to expedite housing in this particular way.

Where is that list of the new projects?

We have a map, it's interactive, but we can get you detailed lists as well. But yes, that launched, I believe, July 1. Yeah.

Thank you.

And thank you to Danielle.

Okay. Okay, good. This one's on. Hi. Good afternoon, Madam Chair and Committee. I'm Danielle Foster. I'm the Executive Director of the Capital Area Development Authority, which is a joint powers authority of the City of Sacramento in the State of California. So thank you for having CADA.

I, prior to this, was in the role of Housing Policy Manager for the City of Sacramento and have worked a lot in local government. So I got to interact with the excess site program at the local level as well. As was mentioned, and it's such a creative program and really helped further affordable housing and is helping further affordable housing.

At CADA, we also have a nonprofit arm that we use, our capital area community development corporation, and we utilized them in the development of Sonrisa. I passed out a handout, two handouts, one that details Sonrisa with some pictures, and then a second handout on CADA, just as additional information on our portfolio.

We were honored to be identified as the first affordable housing developer in this program, the excess site program. And we developed the site with CFY development using the typical myriad of affordable housing stacked financing. So including the site lease through DGS, we also used funding through HCD for transit oriented development.

We used the federal tax credit program and got a private equity partner.

And we also got private financing through JPMorgan Chase for both our construction and permanent financing loans, as well as direct local subsidy funds that we had at CADA and worked with our local municipal energy company, Smud to get some energy funds to the project as well.

So gathering these sources takes time, and it took time here, but with the land and the local subsidies, the project was able to compete well for the other funding sources.

And as Megan mentioned, now they have taken the step towards the local government grant matching grant program that wasn't in place for this one, but it has definitely helped on future projects.

And when I was at the City of Sacramento, we were able to actually provide land that allowed for a project to incorporate additional units, about 22 additional units, and childcare services on site. So we felt like that was a big win for the community in the Del Paso area, where it was much needed.

At this site, we were able to build 58 units and include a community job center and charter school on site.

So on the first floor we have about 1300 sqft that is run through the Sacramento Employment and Training Agency and Highlands Community Charter School, where they can actually help people get GEDs or prepare for jobs and interviews and those types of things. So this was a great asset to this community.

When looking at the affordable housing levels for the project, we're of course, looking at the balance of meeting local needs, meeting requirements of programs, but providing for a mixed income community that can serve a range of households, score well for funding, and also continue to support both the debt that we need to pay for and the operating expenses overall.

So in keeping with the goals of the excess site program, Sunrisa really worked to demonstrate some innovation both within Sacramento and the State of California as it relates to both affordable housing development and housing development overall. And to highlight some of those innovations, we were focused on a micro unit concept.

So all of the units are about 260 sqft studio units just to maximize the number of housing. But we balanced that with large windows to get lots of natural light. We provide a Murphy bed to make sure it's a very livable situation. It's a great layout for that.

It was the first all electric development in Sacramento prior to us having local requirements for that. And, you know, many cities are having that conversation, but this was an opportunity for us to partner with SMUD on preparing them and us for those requirements that included induction cooking

and we've done education with our residents on that and provided pots and pans through SMUD. So took steps to really further all electrification there. We incorporated cross laminated timber, or CLT is what it's also called. And that's a product that reduces carbon.

And it also can speed up the development process in the way that it goes up quickly because there are large panels of timber, there's still no on site parking, which is still something that projects are kind of hesitant to do downtown.

So it was an opportunity for us to push that innovation forward on the ability to have no onsite parking. And we provide transit passes through the funding we got through Housing and Community Development. And then we also have another two thirds of residents that walk and bike to and from the site.

We continue to work with local service providers and nonprofits on supportive services. And we incorporated drought tolerant native plants, really focusing on reducing water usage at the site. Specifically, the affordability in this project is about 38% at 40% of the area median income and below.

So within that very low income mark, another 50% are at very low income, the 50% threshold and the remaining 12% are at 60% of the area median income in Sacramento. So this means that we're serving households from approximately $33,000 a year to $50,000 in gross annual income. But then we also have tenants.

About 30% of our tenants are at incomes less than that, at $20,000 or less, because they are leveraging other programs that can help them pay the rent, like voucher programs and service providers that assist them with rent. We also, in creating these rents, we're looking at the utility costs.

And given the size of the units and the energy efficiency, the utility costs a month, each month at Sonrisa for a resident is only $54. So that allows the rents to be even more affordable. So Sonrisa also is very accessible and serves tenants with disabilities in about a third of our units

and we provide onsite supportive services through community resident services and a local group called Step up that also works in Southern California. So lessons we learned through this, and it sounds like a lot of these are already being incorporated, which is really exciting to see.

One of them was just the ability to leverage additional resources and matching the local government resources, as is already being done through Housing and Community Development. That really helps the developments move quickly and be competitive for other funding sources. So that's great.

Our need and ability to continue creating community through property management, which we know, but just continues to be something I want to uplift and highlight and resident services is paramount to the success of these sites and innovation sometimes creates some challenges and lessons, having micro units created some challenges around the market study and trying to get some of the requirements completed for funding sources.

So I think just recognizing the need for flexibility when we're looking at innovation thresholds that we were able to overcome, but just sometimes challenges that pop up and to keep in mind that furthering these creative approaches to development can provide a safe place for this new technology to be tried and uplifted and that will have a greater impact on both local and statewide housing crisis.

So thank you for the opportunity to speak on this program. We are very excited to be partnering on future project in the program and continue to look at it as a great resource.

Thank you. That is all three of your testimonies and I'm going to go ahead and open it up to questions from any of our members. And I'm sorry, my Assemblymember Mathis, I did not introduce you or give you an option to make comments, so you can ask in your questions or make whichever comments you like. Welcome back.

Sure. Thank you, Madam Chair. Thank you for the presentations today. Obviously something that, you know, we're just a small number of legislators that probably represent a much larger number of our colleagues who are trying to pay even more close attention to maximizing the opportunities that we have for state resources, both dollars and land.

I want to again extend my personal gratitude for our ongoing work together as we're ahead trying to tease out both site specific but also program design that can help us to improve upon lessons learned.

And I'm grateful for both your excitement and passion to sort of work on the Executive Order and then follow that up with legislative direction and other support that you have that you need from us to be able to just really do all we can do.

And it's interesting when we look in some of this background here that we say when we start with 44,000 state parcels and I get a lot of those are remnant of, or they're lands that are distant from urban centers and not conducive to where we want to place housing opportunities, and you kind of whittle it down

and there's a natural. I went through the same exercise on City Council, too, where we had a lot of city excess lands, but they were remnant parcels or they just didn't really work. And so I understand how that whittles down.

But then we can get down to 114 excess sites, and then of those 20 under direction, under, under development today. And ones that are, as you said, dependent on subsidy. Right. We got to find the money, we got to find partnerships to pull together.

And I guess I wanted to see in that you're working with what you have today, the guidelines and best practices that we have today, and the responsibilities to the public interest to manage these lands well and get the most for our money over time.

And so a couple of questions, I guess as you're going through this experience and maybe thinking about how do we evolve this to accelerate and grow our state's potential for use on these lands. And one question I have in mind is kind of recognizing my own experience as I'm thinking about other Department lands.

Have you had, you're taking a lot as DGS. Right. To sort of, we're looking across and say who would be like the one right place to be able to take leadership on this role. Thank you for that.

But how are you finding, as you are engaging with other departments or agencies as well, when they say, no, this is Parksland or this is DMV land, or this is in our bucket.

Do you have the authorities you need, or do you need improvements in the ability to work across state agencies to maximize and accelerate what should be a shared goal?

Yeah, I'll start on that. I think it's a totally fair question. One of the prior, before the Executive order, and I'll also comment on the codification, because it was another step in that same direction. The way the statutory scheme worked was every Department held property in trust for their own mission and purpose.

And when they deigned to tell us that they didn't need it anymore, then we get to do something with it. And there is zero incentive for departments to do that. Zero incentive. They don't get to pocket any money as a Department if the property is sold.

Maybe, maybe, maybe there's some benefit if we lease it out for them, but for the most part, it's better for them to keep it than not, unless they're losing money in like warm shutdown or something.

And so what the Executive order did was said, all right, well, let's do that proactive look to see who might be holding onto properties that they shouldn't. And so that was huge. The codification of the Executive Order made that every four year process, whatever the term for that is.

And the goal there obviously is to say, you know, obviously administration's changed, directors and appointees change, departmental direction changes, and so not letting it simply be, well, some director 14 years ago said no, therefore it's no, it's, let's constantly refresh this. And I think that convert, that has been a huge step in the right direction.

It's also empowered us to have some hard conversations with some of the departments, if you, it's kind of hard to tell from the list and the handout, but some of the properties on there, you know, there's a project in San Quentin that was former CDCR excess property.

It was outside of their buffer, of their buffer, and that is going to go to essential workforce housing and teacher housing to stop them from having to shut down classrooms. There's a project at Tascadero that is on state hospital property.

And so those conversations would never have been possible had it not been for the Executive Order and the codification of it with the Chair's Bill. I think the challenge with having a much more centralized approach than that is, is twofold.

One, we have no idea what the actual operational needs are for those departments to serve their local constituencies. Thinking about DMV as an example, the other piece is to vacate a property would generally require funding for them to do something.

And depending on the State of their Fund, the overall budget, you know, if it's a $40 million DMV project to repurpose that property, that's a chunk of change that has to go somewhere.

What we have been doing with departments, as you know, as well, for example, there's a project in San Francisco right now that is in the process of being finalized that will hopefully marry housing with the DMV. And so we're looking at these as much as we can as prototypes.

So we demonstrate the proof of concept, and then they have the ability to sort of replicate throughout. The last thing I would say is, you know, in terms of that windowing process, absolutely. Beaches, mountains, forested lands, lakes, things like that, those are never going to be suitable.

But what HCD did to their credit is really, I mean, if you looked at our program and you looked at all the fund sources that get tapped, tax credits is ubiquitous. It's almost on every single one of them. And that tax credit program also generally informs many of the other subsidy programs that exist out there.

So they actually created an automated algorithm, which we could do to local properties if they're shapefiles, that first all screens out things like super fun sites. It's able to actually geographically reduce the developable portion of the parcel to make sure there's at least a minimum viability there.

And then it applies tax credit financing scoring to look at viability. And so we're able to say, to Megan's point, this parcel here, it would score competitively enough in order to be awarded a project across multiple subsidies. And so that's actually what drove the conversations with the departments.

It's a smaller universe than you would think, but it absolutely in this data informed way and being able to automate that and update it over time means that every single time someone says, I don't need property anymore, whether it's CalTrans or CDCR or whoever else, it automatically now goes through that screen.

And if it's housing suitable, we're adding it to the map and developing it that way.

That's really encouraging to hear. I get exactly what you're saying, and I think that's exactly the data driven and strategic way to be able to identify sites. And once that kind of meets that criteria and everything, be creative and think about ways to sort of break down barriers and pass precedent to get to Yes.

I'm reminded to nothing to do with housing, but we had an experience in San Diego between parks and transportation, where we built a new transportation headquarters. It's beautiful. It's an old town also in my district, and across that way, we also so new that we wanted to have a new addition to the state parks area.

And it took seven years to transfer the property from the transportation bucket to the parks budget. Why? Because parks had no money to pay transportation for the land. Constituents didn't care. They're like that state, that state, like, just make it happen.

And so these are things that, you know, as legislators, we're trying to be helpful to, you know, think about, you know, 21st century context about, you know, being more efficient with all, with all properties. And I'm wondering maybe kind of taking a step beyond that and maybe bringing KETA in the loop as well, too.

If we're thinking about ways to think about local housing agencies or special JPA partnerships, if that's also something that you're doing as you're looking through these sort of minimally screened areas and not just limiting ourselves to what state agencies can do on their own, but where the partnership opportunities might exist.

So at the risk of monopolizing, let me start there, too. 100%. I mentioned in my remarks that there are properties that we pursued site specific legislation to sell as opposed to redevelop under this program as a lease.

And the reason for that, for the most part, is because the amount of staff effort it would take to redevelop those properties piecemeal over, it would be 20 projects on a hundred acre site. And it happened over 15 years.

And so we would literally have to shut down the whole program and redirect staff to go do one site. And so in those instances, you know, and this is particularly true for the developmental centers.

The statute that has got put in place generally through trailer Bill, again, thanks to the budget subs, has given very specific direction to local governments to re-entitle the properties in a housing specific way, because the properties were almost never entitled for housing.

They're generally institutional settings and gives us the ability to say you did a bad job and pull it away from them, but then sell it in accordance with that.

And so that's another way of making sure that there's a partnership and that there is a housing centric outcome without having to cripple the program or ask you all for 10 new staff. And so that's kind of, you know, I think there's an absolute world in which that can happen.

Kate does a great example of an existing partnership in this area. This is not the first housing project they've done. It's not the last. They've been very successful in it in the capital area. So I think those sorts of partnerships are the only way this really scales in a, in a meaningful way.

Did you have anything maybe to add through your experience? And then you furthermore had partnered with local, a myriad right, of both public and private investments as well to make it happen.

Yeah, I would say both on the local level. When I was at the city, we were looking at sites with DGS and trying to figure out where the city could offer land that was adjacent to sites like we did at Arden and strategize that way, and then now at CADA. Yet we continue to think about, okay, what are parcels that would work for both us and the program and think through, and talk through those.

Yeah. And then on the kind of economic side of things, as expensive as things are. I remember my first year here, I had a bill that was trying to be able to authorize the, for purposes of producing affordable housing using excess transportation lands for partnership, being able to reduce the value of that land to an acquisition value as opposed to a fair market value.

It saves a huge lot on and raises probably the viability of something penciling out. I know why that wasn't successful, but maybe through another example thinking, do we only need 100% affordable housing? Because we also need market rate housing if we're going to be able to build the units that we need to stabilize workforce housing too.

And do we have constraints? Of course, we want to prioritize affordable housing and prioritize deeply affordable housing. But is that a constraint as well in the opportunity that you're seeing now?

No, no. Great. TFS. I also mentioned in my, and by the way, if I'm monopolizing, please. Okay. But I mentioned in my remarks, well, actually I didn't actually, I cut it. There was one more thing that we worked with a budget subs to do, which was amend our leasing authority.

It used to actually be for housing, much more prescriptive. And what we found was that in order to maximize number of units, be able to tailor things to areas, and in some cases just generate more affordable units, a different spectrum.

So you could maybe get 150 units if it was 100% affordable, but you could get 300 units and 500 units of market on the same site if you did an 80-20 deal. And so our leasing authority, that's why Megan mentioned those are the floors that the leasing authority now allows.

That in San Diego, our former state office building, it's 11 story building surrounded by 30 to 40 story towers. And there's literally a dead parking lot across the street that we own that is awarded to a developer who's contemplating 2 41 story towers in about 1,500 units compliant with the authority exceeds it.

There's a decent workforce component that's actually subsidized by the market rate units, and they're not planning on pulling down these hyper competitive subsidies. So it's a great example, I think, of a way you can leverage property to really develop in a different way.

Thank you. I'm glad you brought up that example because maybe it'll be a final point on just a closing statement is the time it takes to get something done. I mean, this Ting property down in San Diego is still in the same condition as when I vacated it.

Was told to get out of there in the fall of 2022. And so I do know that developments, especially that intensity, take time and responsibility. As we're thinking about state resources, we want to do it right and maximize potential.

But are you seeing the need to further refine our processes to help, maybe try to consolidate some of these pinch points in the timelines of development and, you know, get to more design, build opportunities, work for ways of local state partnerships or private public partnerships that help things develop faster?

Yes, I mean, I think, and Jason can add on to this, too, but just I wanted to jump in to say, you know, I think something we're trying to do in this program is innovation, but where that matters. And so part of innovation is that, like, you're doing it for a purpose, right?

You're doing it because it's going to happen faster. You're doing it because it's going to lead to a cost advantage in some way. But innovation can't just be for no reason. But, like, sometimes you do an innovative thing and you learn some stuff, you know?

And so I think some of these you'll see, like, like, we did an innovative thing. We thought, we thought it would lead to a certain outcome. And I would say in that case, like, you know, we're ahead. We're still exploring.

This is somebody who's trying to do something very different from a financing space to try and take pressure off of the state system. And that's going to take some time to work through and investigate and explore.

And we have had cases, not that one, but other places, where we've done something, we've pursued a really innovative approach, say, around modular housing or something.

And then that cost, where we were doing that because it was supposed to have a speed and a cost advantage, and then the contractor, they were working with, that sort of speed and cost advantage disappeared. So, you know, hey, we tried something. We're gonna readjust because, like, sometimes innovation is gonna give us exactly what we want.

Sometimes it's gonna give us a little bit of what we want, but we learn a lot, and then sometimes we're gonna pivot back to a different approach. We're not gonna make. We're not gonna make rash decisions in this program just for the sake of innovation. So I'd say that's a--that's something Jason and I both model for our teams.

This is like, try new stuff in the interest of something important for the ending the housing crisis. But if it's not working, let's try something else. And so I think that's some. Sometimes the delays are going to be just that. They're going to be lessons learned.

Great.

Adding on to that, I think there is a little bit of a damned if you do, damned if you don't type scenario, because those affordable housing subsidies are hyper competitive. Perfect score and a great tie breaker, and you have a chance.

Whereas for the San Diego development, just kind of using as an example, that's primarily looking at standard interest rates. Right. And so fast forward or go back in time five years, it's a lot more viable to do that than it is today. That project wouldn't work in Sacramento.

And so it is absolutely sort of depending on the path you go, you're either subject to macroeconomic conditions, which are good or bad, or you're subject to some of these hyper competitive of subsidies. There isn't really a silver bullet, unfortunately. And so it is hard to navigate.

Yeah. Well, thank you again for both the innovation that you've been committed to for years, the input today as well. Just know that we are hungry to be partners in trying to be able to support you in any way, to accelerate what you're doing through your offices and kind of break down some of these barriers and help you make things, make housing happen faster than. Thank you.

So I have a few questions and comments. On your--I think it was your first statement. You were talking, do we have a total number of units that have been built on state property?

I know that you mentioned we have thousands, but then a closer look, there's really 20 that you saw, and now three that might be adaptive. Am I getting my list mixed up here?

Yeah. Let me clarify. So, first and foremost, let's make sure we're just aligning on terms. So the handout, which is derived from our website. So no issue with whatsoever, focuses around a property. So South Lake Tahoe is a fantastic example. It's a rather large site in Tahoe. It is four phases.

So four different developments on that same property for the purposes of seeking financing for the purposes of the regulatory agreements and ground leases. There are four different projects, but it's one property. So what you're looking at in that list is the property.

If you were to break them up into the separate developments on said property, that's where you go from 20 to about 38. If we're talking about--and the reason why that's an important distinction is obviously because they're phased. They get developed in different timelines. In Tahoe, as an example, they are finishing their first phase next month.

The second phase will be constructed this fiscal year. One more should be breaking ground this fiscal year. And the fourth phase is a little bit further out. So it is kind of hard to talk about the numbers given how the financing structure actually works for the projects. But that said, the Sonrisa project is done. Done.

Let me make sure I don't mislead you. As I said, Tahoe has two under construction now, so one of which it'll be completed literally next month. And so that's about 60 to 80 units if memory serves there. Reedley just finished.

We don't list it on our website because the grand opening is November, but that particular one is another 50 units. So those are the ones that are done. And then there's, again, Tahoe phase two in construction. Sacramento Arden Way is in construction now, as well as the Riverside, CALFIRE project.

And then there are six more that are slated to break ground this year. So in terms of completed, we could use roughly 200 would be a fair number. Just rounding with much more in construction.

It's going to be a big year. The next 12 months is a big year for them. So then looking at the Sonrisa, you said that there's 58 units. And I know the project very well as I walk by it almost every day and live very close to that. But how many people are in these units as their studios? Are you seeing 2, 3 families or do you have an estimate or is there even a limit on that?

We do look at household size when we're bringing people in just to make sure it's livable. We do have, I think we're at 72 people right now in 58 units. We have a lot of singles. We have some couples and we actually have also single parents. So a parent and a child in units. So it's a variety of household types.

So you mentioned a charter school being there in that space. How many students do you have from that that would require a school on site?

So it's a charter school that works with adults primarily. Yeah, highlands. And they're really focused on the GED side of that.

I thought you were like, it was an elementary school. Okay.

And it is open to the community, I should say it's a community offering.

How does CADA let people know about either future projects that are coming online or current openings within your CADA system?

That's a great question. So we do some traditional advertising through Zillow and through all of the standard kind of outreach practices, but we work mostly with our community partners to make sure that people are aware. A lot of service providers, hope cooperatives step up.

Just a lot of our local service providers that are working with folks that are either at risk or coming out of homelessness or just looking for affordable housing. We also advertise through the Sacramento Housing and Redevelopment Agency to voucher holders on the website. They use the affordablehousing.com website. And people can get on our waiting lists and visit our website directly as well.

Because I understood at one point you had like a first come, first serve, like January 1. Is that still operating where units open up and then people wait in line? Is that still happening?

At some points in the housing crisis, we've had people wait in line, I would say now. And with Sonrisa specifically, people were interested during construction, and they went to a website and filled out a pre application and became part of our list. And we've had an ongoing waitlist for that site in particular.

So somebody's interested in any CADA unit, including Sonrisa, they could contact CADA and get on a waiting list for any unit that comes up?

Absolutely. We do close an open waiting list from time to time just because they can get very long, and we don't want people to have unreasonable expectation. But our waiting lists are open right now for Sonrisa and other sites, and different sites have different requirements. So that's why we have lists for each site.

So going back to the three projects that you analyzed for adaptive reuse, are you, you mentioned there were several. You got down to a list of three. Are those going to be under construction or where are we on that process?

Yeah. So just, again, hopefully making sure there's alignment and understanding. There were three that were initially studied. Those are awarded. Then there was a subsequent study of 13 in which we looked at. So an additional 13, and then we got down to three. Those projects are not in the pipeline for award as they are currently in use.

There are two towers in Sacramento. One's in Oakland, one is in Riverside. And so as sort of the state continues to do its return to work and hybridization of telework, we are reassessing our occupancy. We also. This is an important consideration. We also do a real estate portfolio review. It's either every year or two years, depending.

I mean, we kind of skipped in the pandemic for obvious reasons, but generally it's every year. And part of what we do there is we look at the cost of a bond financed renovation of the buildings that need them, compared to what a similar term in lease space in the area would look like. And to the extent that it's more cost effective to vacate a building, that's when we make the decision one way or the other.

So between utilization of these buildings sort of normalizing out, us looking at what else is in the area and needing to do some renovations to bring people in, we then do the cost effective analysis and if it's cost effective to get them out, we would generally declare the building as excess, take a while to get them out.

But concurrent to that, we would offer them up for housing adaptive reuse or demolition and new construction, depending on what is more cost effective, and generates the best number of units with the greatest breadth and depth of affordability, of course.

Okay, and some of you have heard me talk about this many times, so you won't be surprised. But on our state hospitals or former disabled developmental centers, we have several in the state. And depending on which jurisdiction you live in, I now happen to represent not only Orange County, but parts of LA.

And we have two very different thought approaches to one would be Fairview and the other, and I think it's Norwalk State Hospital. So because you have very different leadership in both counties, in the Los Angeles part of the district you have five supervisors who have--are initiating a very aggressive plan to put forth mental health housing, former foster youth types of housing, other types of affordable housing, and seem to be working very aggressively to make that happen.

On the other hand, you have Fairview Developmental Center, which seems 118 acres and there seems to be quite a bit of local minds to do very little there. Can we speak to how this looks across the state and what local jurisdictions, their input on state land?

And do we foresee reimagining these state hospitals for what we are going to have a very critical use, which is beds for some of our Care Court patients and others?

Yeah, that's a very big question. I will try to do justice to it without oversimplifying. So a couple of key distinctions between those two sites in particular. So Metropolitan State Hospital in Norwalk is still a fully active mental, I'm sorry, adult forensic institution. And so the campus is still fully in use.

There are portions of the property, particularly on the northwest side, that are older buildings. They're actually kind of quasi historic, semi derelict buildings, and they're used for like, swing space and storage and those sorts of things.

And so what the county has asked to do is to renovate six of those buildings specifically for permanent supportive housing, interim youth housing, and acute psychiatric care, which we're working with them on. The Department of State Hospitals has acknowledged that those particular buildings are able to be reused. They don't have any foreseeable use for them.

And so it's a small portion of the campus that's being redeveloped that way. The Fairview Developmental Center, it's under the jurisdiction of the Department of Developmental Services. They have declared the property excess. They've shut down the center. There is some state reuse that's happening there.

There's a project for Cal OES, and DDS has expressed some need for additional housing for those with developmental disabilities, particularly more complex cases. And so some of that is going to be redeveloped separately anyways. But for the balance of the site, they have said they don't need it anymore.

And so that would be an example of a site in which the amount of phased development there would probably take most of our program's resources to redevelop. And so that's the reason why there was specific legislation that facilitated a sale of the property.

It directs Costa Mesa to do a specific plan, but it also provides goals that govern the plan. It's an affordable housing prioritized, specific plan includes a full environmental review, 200 units of permanent supportive housing, and a minimum of 1,500 units is the goal. At present, they have three scenarios that are going through the public.

The smallest number of units is 2,300. The biggest is 4,000. I personally think the 2,300 is more likely, but that is 575 units at very low, 375, 345 at low, 690 at moderate, and then 690 above that. So substantially affordable housing in terms of those numbers.

And so once the specific plan is a little more done, we would then sell the property to a developer instead of leasing it. We would that their development would be governed by the plan, and we would de-restrict the property to ensure that that development happens in accordance with what we're selling the property for.

So that's why that's going on a different bout. It's not that the locals have control over it. If they were to completely turn around and say, you know what, we want the whole thing to be commercial or open space tomorrow, we would thank them, and then we would do something else with it.

But the direction and statute was to do largely what we would have done, but it kind of puts the onus on them and allows us to sell as opposed to multiple phased leases on the property. And last point, I promise part of that is because it's really a master plan community at that point.

I mean, the amount of infrastructure work related, just about every single piece of infrastructure on that campus is either dead or centralized. And so connecting to new wastewater requires a downstream upgrade to the plant, new utilities. It's not insignificant.

And so the complexity of doing that is really best done with somebody who has control over the whole site and can phase it accordingly and defray the costs according against all the phases.

All right, thank you. Any other questions before we start our next panel? We appreciate the work you're doing. We know it's not easy. We know it's complicated. It's vital. And as you have seen from many legislators, being courageous and innovative and timely are the goals for many people when it comes to implementing these major state initiatives. But we thank you for all you're doing. Thank you.

Thank you.

We're going to call up our next panel.

We have Jennifer Seeger, Deputy Director for Financial Assistance for State Programs, Department of Housing and Community Development, Lindy Harrington, Assistant State Medicaid Director, Department of Care Services, and--do you say Marlies--Marlies Perez, Community Services Division Chief, Department of Care Services. And we will start with the LAO first.

Good afternoon, Chair and Members. Ryan Miller from the Legislative Analyst Office. We've been asked to provide a brief overview of Proposition 1, and then we'll turn it over to representatives from the Administration to provide more detail concerning its implementation. Proposition 1 did two main things.

First, it made broad changes to the Mental Health Services Act, but second, which is more of the focus of today's discussion and was enacted in AB 531, was a 6.4 billion dollar general obligation bond to build behavioral health infrastructure and to build housing for people with behavioral health challenges.

Roughly two-thirds or so, a little bit over two-thirds or 4.4 billion of the bond proceeds will go to the Behavioral Health Continuum Infrastructure Program, also known as BHCIP, that's administered by the Department of Health Care Services.

The BHCIP Program was created in the 2021 budget and has provided or is providing about 1.7 billion dollars that was initially a mix of mostly state General Fund, but also some federal pandemic relief dollars. The general obligation bond proceeds will be in addition to that amount that was initially appropriated in 2021.

BHCIP provides grants to local governments, tribes, nonprofits, and for-profit companies to construct, acquire, or renovate facilities for the purposes of providing behavioral health services. The remaining almost one-third, or about two billion dollars of the bond proceeds will go to the Department of Housing and Community Development to build housing for individuals experiencing or at risk of homelessness and that also have behavioral health challenges.

Of that, about two billion dollars, about half or one billion dollars will be set aside specifically for veterans. And so with that, I'll turn it over to the Administration to provide more detail about the implementation of the bond.

All right. Welcome. Thank you for being here.

Good afternoon. Thank you, Madam Chair and Members of the Committee. My name is Jennifer Seeger. I appreciate the opportunity this afternoon to provide a brief overview of the permanent supportive housing component of the Behavioral Health Infrastructure Bond Act. As was previously mentioned, there's approximately two billion dollars in funding available.

Of that, just over one billion dollars will be targeted to veterans, which will be designed and implemented in collaboration with our partners at CalVet. 922 million will be for Californians experiencing homelessness, but not exclusive to veterans.

The new program--and we're calling it Homekey Plus--will be modeled after HCD's existing Homekey program and build upon its success in getting units built very quickly and efficiently to house Californians at risk of and experiencing homelessness.

Since 2021, the Homekey Program has funded more than 250 projects, providing 15,319 units with a lifetime estimated number of Californian households to be served over the lifetime of those projects, topping more than 167,000. So, similar to Homekey, Homekey Plus will serve extremely low-income individuals and households experiencing or at risk of homelessness.

We're going to focus on speed, we're looking to get units up and available within 12 months of funding, and we're going to require at least five years of supportive services funding. While the initial--

Are those still going to be the motel or hotel type of property?

Yes, that will be an eligible use, but not exclusive to that. Yeah. While the initial seed money on the operations will be a requirement, the program will be collaborating closely with our state and local behavioral health colleagues to promote and encourage the long-term sustainability of the projects.

And while the Mental Health Services Act has always been available for housing support, the Behavioral Health Services Act, which my colleagues will speak to, really strengthens the use of this tool by requiring 30 percent of county allocations to be used for housing interventions, which could both be used for rental subsidies and for funding to pay for supportive services.

And then additionally, there is 35 percent of the county allocations that are available for full service partnerships and could also be used to support these Homekey Plus projects. annually. These sources can translate to important county support that connects health and housing outcomes. So as DHCS and our other partners release guidelines on this for counties, we'll be supporting and really closely following what they do in work in collaboration.

So, to your point on the eligible uses, Homekey Plus will provide applicants with the flexibility to take advantage of opportunities specific within their communities, resulting in the speedy acquisition. That includes the acquisition, rehabilitation of the motels, hotels, and other sites and assets that could be converted to permanent supportive housing, as well as new construction.

HCD is actively working on the design and build out of the program. We're currently engaging with state agency partners and stakeholders to inform the program design. We have developed a fact sheet and I have copies for you here today, which I would like to provide that will be available on our website in the next couple of days.

In late June, we did send out a demand survey to potential applicants and we're working to schedule small group listening sessions. Thank you. The plan is to release a NOFA announcing the availability of the full two billion in funding in November. We would anticipate then accepting applications in early 2025 and then have awards announced beginning in summer 2025. And there's a little more of a detailed timeline on the back of that fact sheet.

And will there be--and sorry; I hope you don't mind me just jumping in--will there be this allocation be done regionally or will it be done just whoever decides to apply? Because I know that's been an issue where some cities aggressively--or I should say county--cities aggressively apply, San Francisco, Los Angeles, and then others don't apply at all.

And so that shifts not only the support services to one region and then many others. Sometimes it's actually an intentional decision to not apply because if you don't apply and you don't have the housing, you don't necessarily have to house these individuals. So is there any thought into that?

Yeah, it will mirror what we're doing currently in the Homekey Program, which is to have regional allocations and regional kind of targets, and we have an open application period, and we hold those regional targets for a certain dedicated period of time, and that if we don't get sufficient applications within those regions, then they would roll over to a general pot. So yes, we will have absolutely regional targets.

But in the language of the legislation, was there any encouragement to make sure every jurisdiction is a host to these types of CARE Court, or if you want to say, Prop 1 beds?

Yeah. So this would be for the permanent supportive housing component, and all local governments would definitely be available, would be eligible to apply and encouraged to apply. Yes.

Okay. I'm just trying to get more at, is there any way to not just encourage but to ask that local governments be part of this solution? Because I've seen too often in my tenure here, which is now a decade, that some jurisdictions are fully invested with the spirit of what we're trying to do and to house people with many, many--whether it's mental health, schizophrenia, other issues, and others are absolutely avoiding and delaying and doing very little.

So trying to get at, is there any part of the legislative language? Or through HCD, I know through housing elements, there's supposed to be language that cities present saying that they have some kind of responsibility, but is there really?

So I think part of that will come into play, and I'll let my colleague also talk about that with some of the plans that are going to be developed and required under the Behavioral Health Services Act funds, which would--a portion of those funds have to be used, have to be used for housing interventions.

So there is a requirement that they are allocating these funds for the purposes that we're setting up within the Homekey Plus Program. So, yes, there is that. It doesn't have to be the Homekey Plus Program, but they would definitely have to be using those for housing services.

Thank you. Thank you for this, too. All right, next. Thank you.

Thank you. So our colleague here for the LAO provided great background. So I'm going to just kind of skim through some of this because I have a lot I want to bring forward with some of the questions you had around our current Behavioral Health Continuum Infrastructure Program, which I'm just going to call BHCIP, but also the bond, and then some of the housing funding under BHSA that our colleagues at HCD have been talking about as well.

So, of the bond--we call this bond BHCIP--and so, as was mentioned, we have a little over four billion dollars that is being administered through DHCS, and so this funding is going to be administered similar to our current BHCIP Program, and Proposition 1 pointed right to that statute.

So the same requirements, a lot of the same requirements apply. And so it's to build out local behavioral health treatment slots and also residential beds. So one difference is this is not housing. It is for treatment access. And so DHCS estimates that the bond BHCIP will fund 6,800 residential treatment beds and provide over 26,700 outpatient slots across California. And so we've already released our bond BHCIP Round 1: Launch Ready, and that is going to be competitively awarding over three billion dollars.

And once again, this is to acquire and rehabilitate real estate assets to expand the continuum of behavioral health services. So of this amount, of this 3.3 billion, 1.47 billion is designated by the law for cities and counties to apply for. This is really the ceiling--not the ceiling, excuse me--the floor. They can be awarded above that.

And then 30 million is designated for tribal entities, and that is the same. They can be awarded more than 30 million as well. But this is a set aside for local government entities. And then the remaining 1.8 billion is available to all the entities, and that includes the cities, the counties, the tribal entities, nonprofit, and for-profit.

So we released our request for application on July 17th, so it is out there right now for folks to be applying. And so prior to the release of the RFA, we held our first bond BHCIP public listening session on April 19th, and then we released initial policy guidance on all of the bond BHCIP rounds of funding, and that is in our program update and that was released May 14th.

So our Round 1 applications are due December 13th, and then our award announcements are anticipated for the spring of 2025. Under the bond BHCIP for funding awards, I know the committee here asked about how we are awarding these.

We are prioritizing regional models or collaborative partnerships that includes public/private partnerships that's aimed at constructing, renovating, and/or expanding community-based services, as well as projects that use like a campus style model that has different levels of the continuum of care right there, all on one campus, so an individual can move through those services more easily.

And then also we have a focus on residential treatment facilities. There is also, to your question earlier, there's a geographic distribution of how each area can apply for the funding. So we have like a balance of state funding, so our northern partners can, you know, apply for that funding.

So it is a geographical spread not only of who can apply, but how the funding is awarded as well. And then, as in our prior BHCIP rounds, the funding is intended to expand behavioral health treatment capacity. It can't be preserving existing capacity or fund treatment services. This is really for that bricks and mortar infrastructure.

And then grantees have to commit to serve Medi-Cal beneficiaries. So, and we anticipate releasing the bond BHCIP Round 2: Unmet Needs RFA in May of 2025. So for our BHCIP Program to date, we have awarded, as was stated earlier, close to 1.7 billion dollars through five rounds of funding.

And this was to address key gaps in the behavioral health continuum of services. For our rounds three through five, these are really set on infrastructure and we awarded funding to support 130 behavioral health infrastructure projects. And once again, kind of like in our first panel, these are projects. They could have multiple facilities on each project.

In fact, we have one project that has eight different facilities in one project alone. And so that infrastructure projects, they're projected to complete the construction in the next three years, all at various stages of completion. 30 projects are projecting construction completion in 2024. And so there's different awards across different types of entities.

We've awarded from rounds three through five, 41 county, one county kind of other, where they have a partnership, two city projects, eight tribal entities, 69 nonprofit, and nine for-profit. And we have more information on our website and our data dashboard.

So with all of these projects, expected to add over 2,600 residential treatment beds and serve over 280,000 individuals in outpatient settings. We also had in our round one funding, we awarded 185 million dollars for crisis care mobile units. We awarded 16 million to tribal planning grants, and Launch Ready projects was over 500 million dollars.

So I'll close the section around BHCIP just with a few examples of projects to date. So April of this year was our first opening of our first BHCIP Project. It was with Tahoe Forest Hospital District in Nevada County, and they began providing hospital-based outpatient treatment services and in three months of operation have exceeded the projected number of individuals they anticipated to serve. And so they're already at over 600 individuals that they've served.

And then a second project was a Paving the Way in Los Angeles County. They celebrated a ribbon cutting in April, and this BHCIP-funded wellness center will provide support to individuals impacted by the justice system. And so additional BHCIP sponsors have celebrated different milestones and events over the past few months, including groundbreaking ceremonies, dedications, ribbon cuttings, and grand openings, with more events being scheduled.

So the next portion I want to talk about is the Behavioral Health Services Act under Proposition 1 and provide a little background also on BRIDGE Housing because that is a key piece of proposition implementation as well. And so one of the key changes in the Behavioral Health Services Act is the dedication of the 30 percent of funding for housing interventions, and this is overseen by county behavioral health departments. And then also there are updated requirements for local stakeholder engagement.

So DHCS has been engaging stakeholders and conducting extensive analysis, developed the key policies to govern the use of the funds of the BHSA and of course, the Bond Act, which I've previously mentioned. And so the criteria outlined in the Welfare and Institution Code for housing interventions that may be funded with BH dollars are broad.

The additional guidance that DHCS will develop related to housing supports is intended to bolster a range of mental health and substance use disorder needs and provide stable, care-coordinated housing to improve health outcomes for Californians.

So in that WIC code, it has housing interventions really defined, as Jennifer had mentioned, rental subsidies, operating subsidies, shared housing, including recovery housing, family housing, also the non-federal share for Medi-Cal transitional rent benefit, other housing supports defined by DHCS in the Community Supports Policy Guide, project-based housing assistance, including master leasing, capital development projects where counties can use up to 25 percent of that 30 percent in that housing bucket to support capital development of housing to serve the eligible population.

So in order to maximize available funding, county behavioral health departments may not use Behavioral Health Service Act funds for housing interventions that are already covered by Medi-Cal by the Medi-Cal Managed Care Plan per the Welfare and Institution Code.

DHCS is currently conducting a range of public stakeholder engagement forums to solicit and gather feedback, which will be critical as the Department continues to develop the policy, not only around housing interventions, but around the larger BHSA bucket, and a public listening session will be held in the fall of 2024, which will have housing interventions as a key topic. And then DHCS will release the policy guidance for housing interventions in early 2025.

However, prior to the implementation of BHSA in July of 2026, counties can utilize housing resources available to them now through the Behavioral Health Bridge Housing Program.

BRIDGE Housing funds have been awarded to county behavioral health agencies and tribal entities to operate BRIDGE Housing settings to address the immediate housing needs of people experiencing homelessness who have serious behavioral health conditions, including serious mental illness and/or substance use disorder. To date, under Round 1, over 900 million was awarded to county behavioral health departments.

This is projected to create 3,200 beds under infrastructure funding and close to 7,000 beds under operational funding. Under Round 2, over 50 million has been awarded to 16 tribal entities. This funding includes five grantees that receive planning grants and 11 grantees that receive implementation grants, inclusive of both infrastructure and operational funding.

And then under the recently awarded Round 3, 132.5 million was awarded to ten county behavioral health departments to complement and increase the activities they're conducting through Round 1. This funding is projected to create approximately 1.2 million bed nights for people experiencing homelessness who have serious behavioral health conditions. And then the final 117.5 million in funding for BRIDGE Housing is expected for allocation in 25-26. Thank you.

Thank you. Next.

I'm just here to add support or provide answers to questions.

Okay. Our colleague just left off. I do have a question on the veterans type of housing. What are you imagining with that type of--I thought you said a billion dollars to go to veterans housing. What would that look like?

So it could be the same types of eligible uses. So it could be the acquisition of motels, hotels. It could be new construction, it could be conversion of existing properties to residential properties. So it can be a wide range of things. Everything that would be eligible under the non-veterans component would also be eligible for the veterans.

And then anybody can answer, and I don't know if she left, HCD. One of the things that we've seen over the good handful of years, whether it's the last five years, but maybe more, is the escalation of prices in these units as whether it's motel, hotel owners, other people who hold land that might be available for these types of uses, that price increase, of course, the price per unit, some of the estimates are about $700,000 per unit.

Is there any way to again relook at how we're building these units, the timeframe, the timeline, and the cost? Because some of even the NOFAs look to be about a year from the time of the listening session to the time of the grants awarded, and then you look out at how long it's going to take to not only find the land but to do the building on it. So we're looking at a two or three-year process for these maybe initial beds, and then what kind of price cost are we talking about? Are there any thoughts on that?

So actually, under the existing Homekey Program, we are targeting speed and efficiency and we have seen over the implementation of that program the reduction in the total cost per unit across the board, right? Much--it's significantly lower than what you would typically see in a new construction stick-built type project, right?

With the conversion, we're acting with speed in purchasing the properties. Right? So we don't have the holding costs and doing the renovations. So there are multiple ways that we're attacking the cost already in the original program design of the Homekey Program which will then flow into the Homekey Plus.

What would be the average cost per unit of renovation for like say a motel conversion?

I don't have that off the top of my head, but that's absolutely some information we have readily available and I can get that to you.

And I can also add in with the BRIDGE Housing, we do have a limit on the cost per unit. And I apologize, I think it's a around 115 but we could provide you with that exact cost. But what's great about the BRIDGE Housing is that is a billion dollars now that behavioral health departments have that can provide the immediate housing. It really is the bridge into the BHSA that's gonna help them build out since they can also add in infrastructure.

And to your point, not every tenant wants to take someone with a behavioral health condition. And so really having to look locally of who will accept individuals, but also counties are looking at adding to housing that they have locally for either different entities that provide housing for behavioral health now under the Mental Health Services Act or other sources of funding, but really broadening that out and building out that capacity. And there have been examples under BRIDGE Housing.

Fresno opened up and did a motel conversion just for individuals for behavioral health. And once again, they do have to prioritize those CARE Court individuals that you mentioned earlier in the BRIDGE Housing settings to make sure that they're receiving the housing that they need. So we're really excited that we have this interim funding, really, that is already off the ground that's going to help bridge into BHSA.

So trying to be as pragmatic and as positive as possible, as these projects start to move forward, Homekey Plus, my concern is, is it still going to be ultimately up to the local governments to approve these type of projects within their cities or county, I should say, but mostly local government because I do have this fear that we get into this NIMBYism, which is great to do it over here but not here.

And how long does that add on to not only the project, but actually housing the people? Because with the encampment Supreme Court decision, we already know that there are efforts to go back to whether it's arresting or moving people from one place to another.

If we're in this holding pattern of one, two, three, four years before we see these dollars out into the communities and then the housing built in this next two, three years, those are the concerns that that voice gets louder and louder of we don't want that type of individual in our community, even if it has on-site services, even if it's programmed as like, say, with Sonrisa, we have some very good models, but that is--are you thinking about that type of public outreach, how you're going to be working with local communities, those type of things?

Yeah, and we'll be definitely building off of, like, all of the technical assistance strategies that we've developed doing pre-application consultations. There are many, there are various streamlining provisions that will be incorporated into the design of the program as well, and again, we're looking to get these units up, running, and occupied as quickly as possible. So readiness will be a significant criteria in determining how we award these funds as well.

Then I would just like to add really quickly, under BHSA, all counties are required to submit a county integrated plan to the Department, and that first plan will be due in June of 2026. And in that plan, they're going to have to be, first of all, working with their local stakeholders in development of the plan.

And it's really been expanded out who needs to be at that table? Not only the mental health colleagues, but also substance use, but also housing and all these other local partners. So they're going to be planning these efforts, and then that has to go through their county board, but once again, that 30 percent of that funding is just for housing intervention. So there's really going to be a different set of accountability at the local level.

But then those plans are going to be coming up to DHCS for our review and approval, which we haven't had that ability either. And so there's really going to be just different parts of accountability at the local level and at the state level that haven't been in place, especially around housing.

And having the folks that are going to be interested in applying for the Homekey Plus funds be part of those conversations is going to be a critical first step, and we'll be encouraging our potential applicants to engage early and develop those relationships.

For my colleague that left, but I'll give you an option if you have a question or anything before then.

Thank you, Madam Chair. I think, one of the biggest things that I've gotten feedback on from my district, and we do the stakeholder meetings and everything, is the need for more intervention funds because it's--we don't need to increase the homelessness.

We need to make sure that those that are on that borderline aren't becoming homeless, because it's like, how do you reduce the population? And it's like, you stop that chain. So with the intervention side--you were just mentioning it--what do you see as a potential to increase access for that?

Because that's really, you know, something tragic happened to somebody's life. They got to get back on their feet, and they don't need to be, you know, down by the river with their kids or trying to get into a home that's packed full or a family's being separated because of it. And the intervention side is what prevents that and keeps families whole and keeps families together. So how do we do more of that?

Yeah, I can start with that. With behavioral health--

And you guys mentioned the Medi-Cal side of that--

Yeah. No problem.

Yeah, that's great, but sometimes that's not enough.

Sure. So with Behavioral Health Service Act funding, a few things are in play. First of all, that 30 percent housing bucket, 50 percent does need to be spent towards the chronically homeless, but the rest of the funding eligibility includes--obviously, they need to have a behavioral health condition, but when you're speaking about a family, it might be a mom or a dad, but then there's family housing that can be supported for the entire family.

So that 50 percent of that bucket is available for those that are at risk of homelessness or experiencing homelessness, and then that other 50 percent is for the chronically homeless to really ensure that we're serving them as well. So that is one piece of it, but also, you mentioned Medi-Cal, and we have the linkages to our transitional rent, community supports, other--

Let me rephrase the question since we do have budget trailer bills that are being worked on. What do we need to do as a legislative body in these trailer bills to increase more access on the intervention site?

I think, Assembly Member, are you asking what it would take to change the allocation that is currently in statue?

As we're looking at doing the budget trailer bills, what do we need to change to allow you to get more access for the intervention side?

I think one of you mentioned rent subsidy as far as assistance, and I know in the CalAIM Program, at least through CalOptima in Orange County, they're actually allowing 5,000--

Right now, she just said only 30 percent. And we're putting 50 percent of our money towards people who are chronically homeless, which we also know there's a percentage of that population that chooses to be homeless, that refuses the services, that continues to refuse services, which is why the Governor just made his order and it was like, 'hey, we gotta clean this up.'

You can't choose to live this way. Nowhere else on the planet does a government allow people to choose to just chronically be homeless. But we need to ensure that population doesn't increase. And we really need to make sure that families aren't ending up out on the streets because we've got inflation and we have everything else that's happening.

We see it every day. We hear about it every day. Just ask anybody that works constituent services. How do we make sure that these government taxpayer dollars are making sure we're not ending up with more families being homeless? What does this body need to do to make sure that money can move to help more families from ending up on the streets?

So I would just--I want to--I want to make a clarification. So the 30 percent that we're talking about is very specific to the BHSA funding. When we are talking about CalAIM under the Medi-Cal Program and the CalOptima Program that you're speaking about, that's actually separate from these dollars and is not part of these 30 percent dollars. So these are programs that we have in place today.

And in fact, in every county in the State of California, all of our Medi-Cal Managed Care plans have taken up what we call the housing trio within the community supports bucket. So for those individuals that meet those criteria, the plans are able to provide housing navigation tenancy support services to help support those individuals. So separate and apart from any funding that we're talking about under Proposition 1, we have that ability.

Additionally, we have in front of the federal government right now, as part of both the behavioral health Connect demonstration waiver as well as an amendment to our existing CalAIM waiver, the ability to have transitional rent be approved as well, which would allow the Medi-Cal Managed Care plans to provide up to six months of rent assistance for individuals that met those requirements.

So we are looking to, again, it's that continuum of services that we're looking to be able to provide and to braid that funding in ways that allow for more services to be provided and for us to really--

Love that word right there: braid that funding. What do you need from us to be able to do more braiding?

I'd just like to maybe augment what she was saying about existing resources, right? And just make clear that this, the 30 percent that's going to be available under the Behavioral Health Services Act dollars, that's additive, right? And there are already a lot of critical resources that have been delivered through this year's state budget, right, through the HHAP Program and other programs that are going into counties--

In Budget Sub One for a long time.

Right? Right, that are going into counties, and HCD recently took over those programs, and to your point on, like, accountability and how those dollars are being spent, we're spending a lot of time, you know, like digging into the accountability, helping local jurisdictions implement those dollars that address their needs.

So this is going to be one component of those dollars. Rapid rehousing, the rental housing subsidies that you mentioned, those are all eligible uses that speak to that continuum, and it's just finding at what point within that continuum we can reach folks.

So do you need more flexibility in that system for reaching out or, I mean, how do you improve this?

Yeah, it's an interesting question and I'd like to maybe think about it a little bit, but I appreciate the opportunity to kind of give you an ask of what you can do to help us and I think we could probably come up with some things and definitely follow up with you, but--

Because it's, you know, we look at the state maps and we got all the blue dots and it's like, that's great. There's this section called the San Joaquin Valley that has nothing. And it's one of the areas that has, per capita, the highest poverty ratios in the entire state.

And so when the average income is about 22,000 a year and it's, you know, we get buses full of homeless people from all over the place that drop people in our neighborhoods and, you know, we have the river, we have good weather, we have all these things, but we have other people there that are struggling and we need that flexibility to make sure we don't end up with more people that are homeless.

And that's why I asked the question because it's not--when we get the constituent calls and it's, you know, mother crying right before school saying, 'hey, I don't know how to keep the roof over my head and I've got to take kids school shopping and I got to do all these things,' what do you tell those people? So it's making sure that we have that flexibility to ensure that those families are kept together and kept whole.

I want to appreciate my colleague's line of questioning. I think the big word there is prevention in the sense of how do we keep people that are already housed, continue to keep them housed, to not add to some of the scenarios we've seen that these numbers keep elevating.

I do know, as you were saying, the very different buckets of money that we're talking about, if you want to say, hey, the new money versus what's existing, and there are some innovative ways that some of the--I was mentioning, CalOptima--are using funds, one that has become really a very important tool.

I'm not sure if you always hear these narratives locally, but as my colleague was saying is, we often will get calls at the end when somebody's being evicted. Maybe it's been two or three months in the process, but now somebody's calling our state office.

Maybe they've already tried to navigate local nonprofits wherever, but sometimes we get these emergency calls. And seriously, this year, it was the few days before Thanksgiving. And what do you do when it's like there's six different families in Fullerton? And so I called CalOptima because it was like, 'okay, who do I call?'

I could call the county supervisor, which we did, and others, and we made a few calls and they said, you know, one of the things, of course, they have to be--qualify, but they are now able to provide these funds like you said. Some of the six month, up to six months. The other area that I've seen a very important support system is sometimes, and actually in Anaheim, where I represent big Disneyland, which I'm privileged to represent, they call them the motel families or the motel kids.

There was actually a CNN documentary about them that how do we have in one of the wealthiest areas, families that are living in motels, not Homekey, but just motels week after week? And they're paying. They are paying for that weekly allotment. And it's because they cannot save up the $5,000 for the first and last month rent.

So now this is something between, I think, three and 5,000 that they can get support for in order to move out of those apartments and into an apartment. So these are little things we've had to dig deep to find them.

It is why the line of questioning that I have had over several years is always about how do we get information to sometimes the most vulnerable who aren't sitting at the table? How do we get access to the service providers so they know these things and they can say, 'okay, well, we have this.'

This might not work for them, but this could work for them, because those are really, really, very, very valuable. All the processes that you're going to put forward for cities and counties to accept these state dollars are of course, imperative.

But understanding the people that you're trying to access, whether it's a returning veteran who I'm sure they had an orientation of all the things that they can access, but when they come back maybe six months, a year later, they many times don't have that at their fingertips.

So I think what's really critical is threading this needle or braiding, if we want to say it that way, and making sure that these critical funds, whether they are in the Prop 1 or in existing funds, that we're using them with urgency, we're using them, whoever we have out there on our communications teams are getting that information to the providers as quickly as possible because all too often, as a teacher for over 25 years, those were the kind of things that would come in onto our plate a few days before a holiday or whatever.

And sometimes there is a voucher that a nonprofit will help get. But it's really, what do we have in line from the state that we can easily access because that's the thing and we can have a lot of services, but if we can't access them, then sometimes we are pushing people out onto these streets.

But this is very valuable. I know it's a huge lift, it's a new chapter for you all, and I'm excited and hopeful, and as I enter my last term, that we are going to start to see some relief out there, really on the streets is what we're saying, but we know you're working on it all day, every day, and we appreciate that. Any final comments? I want to thank our consultants here for putting this together and for those of you who have been with us, thank you so much.

All right, so we are thanking our panelists for joining and we're going to open the hearing for public comment. A quiet day in public comments here. I want to thank you again to our panelists, administration, and members of the public for participating, and we are adjourned.