Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government

Proud to be working together. Also for my call, our colleague Senator Niello, who I served in local government with for many, many, many years as well. So thank you so much. All right, so item one is our panel presentation and we'll work on affordable housing.

We're going to ask the panel to come forward maybe one, maybe two at a time, just given the size of our table. So we're going to start with Nevada Merriman of Mid Penn Housing who's going to help us probe how affordable housing is financed and provide examples from her agency's work.

We are as usual on Thursdays under we've agreed to limit the hearing to no more than six hours. And so I just want to encourage our panel. Although I'm new, the rest of the Subcommitee of course is familiar with our programs and the world of affordable housing in California.

I'm new to the Subcommitee, but I come from being mayor of a city that's been in the top 15 market and affordable rate housing production in California for a decade. And so I would just encourage our panelists in the overview parts of our hearing to get right to the meet and the key issues that we're facing.

We've also done the homework in terms of all the reading and background preparation. So that's for everyone but Ms. Merriman, welcome. Thank you so much for joining us today.

Thank you. My name is Nevada Merriman. I'm Vice President of policy and advocacy at MidPen housing. We've developed 138 communities, about 10,000 homes for Low income seniors, families and folks with supportive housing needs. And we operate in 10 State Senate districts.

The basics of financing affordable housing production in some ways are not so different from financing market rate housing. There is debt and there is equity that go into constructing multifamily buildings. The debt is paid by collecting tenant rents. Over time, beyond this basic concept, things get a bit more complicated.

The tenants rents are lower than market, meaning you can't support much debt. The equity comes from smaller set of investors driven by an interest in tax credits. And public debt at favorable terms makes up much of the total debt needed to cover development costs.

And looking at our capital stack on new construction projects, it includes 40% from tax credits, 22% from private debt, 18% from state sources, 15% from local sources and a little 5% with extras.

It's important to note that the state funding closes the gap between what local, city and county, often both in partnership, can provide for funding and what Federal Government contributes because via tax credits and tax exempt bonds, so the state funding brings us to that place.

It bridges that gap from where the local jurisdictions are to what the Federal Government provides. And that is really an unlocking mechanism. And we carefully select projects based on not only maximizing public benefit, but ensuring there's a viable financing path forward.

A predictable, well funded housing finance delivery system is the number one thing the state could do at this moment to encourage developers to continue to build the pipeline. On the state side, each source is run by separate programs. You'll hear from the leaders of these agencies in just a few minutes.

But there is a distinct public need attached to each of these programs. So some. There's one for reducing carbon middle income housing infrastructure and more. And often a project will spend two to three years after entitlements navigating the system to really build this stack to be able to move forward.

Sometimes these programs have seven applications for every one that can be funded. And in some cases, if you're unsuccessful in one year, you have to wait a whole year to apply again. I'd like to talk about an example in East Palo Alto. It's 136 homes and we're developing it with a local East Palo Alto BIPOC developer partner.

The project was entitled in 2019, but didn't start construction until October 2023. And it took four years to complete the capital stack. So after receiving money from the city and the county, it unsuccessfully applied for the state's Affordable Housing and Sustainable communities program in 2020. The next year was mixed results.

It was able to go back in for that source and secure it. But we also needed another source to Fund the infrastructure because East Palo Alto, although they have land, they have insufficient infrastructure when it comes to water and sewer for really structural reasons. Structural reasons that really go back to redlining and other things like that.

Eventually we were able to complete that stack and move into securing not only the tax credits, but the bonds. It is important for projects in the community to deliver these deeply affordable rents for Low income families. And the case study is really meant to illustrate that meritorious projects lie in wait while we're trying to close our gap.

And not only does this cost the public sector more because construction costs usually escalate, but also there's a societal cost because these entitled homes are not coming online and fulfilling their need. I want to mention that we're emphatically supportive and excited about the affordable housing bond introduced last week. Thank you, Mr. Chair, and to Assemblymember Buffy Wicks. If the voters approve this, funds will realistically be available in 2027.

So there's a real need each budget cycle to look at what any gap is for additional funds coming online and signal the commitment to affordable housing by passing a state budget that's consistent year over year and size to confront systemic housing affordability challenges and homelessness issues.

I'd also just quickly like to highlight that two programs from the Coordinated Budget request by the Affordable housing coalition are 1 billion for state credits and 400 million for the Multi Family Housing program. These are really workforce programs and they balance production and deep affordability.

Both of these sources are critical to the pipeline and we would appreciate support and in collaboration support and collaboration in passing a budget this year that protects and invests our state's affordable housing programs and pipeline. Thank you.

All right, thank you. Why don't we proceed? I see you were trying to. Mr. Griff is trying to get additional chairs for our panel, but next we're going to turn to Jennifer Seeger, who's the Deputy Director of state financial assistance programs.

We'll return to the whole panel for questions in a bit, but turn to Jennifer from HCD to talk about California's primary affordable housing funding programs. Welcome.

Good morning. My name is Jennifer Seeger and I'm the Deputy Director of HCD's Division of State Financial Assistance, overseeing the design and implementation of state funded Housing and Community Development programs, including programs in support of multifamily development, home ownership infrastructure in support of housing development, as well as funding to support local housing and homelessness programs and interventions.

On behalf of our team at HCD, I want to thank you for the opportunity to meet with you this morning. My comments will be focused primarily on HCD's role in funding multifamily housing development.

Over the past several years, the Governor and the Legislature have made substantial, substantial investments in the state's affordable housing programs managed by HCD to increase the supply of affordable housing. Since the beginning of 2019, the Department has released just over 14 billion in state funding to develop multifamily housing statewide. This has funded more than 60,000 new units.

HCD plans to award an additional 3 billion for multifamily development during the 2025 calendar year, as outlined in the Department's Notice of Funding Availability Calend, which is published annually on our website. That brings the total to just over 17 billion in the last six years alone.

The affordable housing finance system is complex and rarely is HCD the singular source of public funding behind a project. It's not unusual to see local, state and federal sources combined to make an affordable project financially viable and ultimately built.

In fact, the foundation of most affordable housing finance relies on tax exempt bonds and state and federal Low income tax credits where an additional 4 billion annually is awarded to support affordable housing developments.

Due to the competitive nature of bonds and tax credits, oftentimes even after award from HCD projects can remain in the development pipeline a awaiting the successful allocation of tax credits for up to a year or more.

HCD has supported the new development at an unprecedented pace and scale driven by historic investments beginning with the passage of the Veterans and Affordable Housing Bond act in 2018, supplemental General Fund investments and federal funding provided in response to the COVID 19 pandemic. During this time, HCD has admitted administered a number of multifamily housing development programs.

Each program is slightly different with specific affordability and special needs targeting populations as well as incorporation of various statewide policy objectives.

I'd like to take some time this morning to highlight some of HCD's most impactful programs and the first one is the Multifamily Housing Program, also known as MHP and it's often regarded as HCD's flight flagship affordable Multifamily Housing Program and first made awards in 1999.

The MHP program has repeatedly been funded through various voter approved housing bonds since then. The program provides funding for new construction, acquisition and rehabilitation and the conversion of non residential uses to rental housing for lower income households.

MHP is now administered as part of HCD's multifamily supernova to provide streamlined eligibility criteria, scoring and award processes along with three other HCD multifamily programs allowing developers to apply and obtain funding for affordable housing through a single application process across four different programs, reducing time and cost.

Secondly, the Affordable Housing and Sustainable Communities Program is administered by the Strategic Growth Council and and implemented in coordination with HCD. The AHSC program funds housing and transportation projects to support infill and compact development, locating new affordable housing in proximity to transit opportunities, schools, jobs and daily destinations.

AHSC is part of California Climate Investment Cap and Trade Program and has been the single largest individual source of ongoing funding for multifamily housing since its inception in 2014 and it's resulted in total investments over 2.5 billion and the creation of more than 15,000 new affordable units and the reduction of more than 4.4 million metric tons of GHG admissions.

The Infill Infrastructure Grant Program promotes infill housing development by providing grant funding for capital improvement projects and including water, sewer and utility upgrades that are an integral part of or necessary to facilitate the development of affordable and mixed income housing.

While the program does not fund the units directly, unit counts are used to generate eligible grant amounts for infrastructure funds that will support the development of units restricted to lower income households within higher density locations designated for infill.

The Home Key Program has responded to the twin crises of homelessness and COVID 19 pandemic, providing funding for the conversion of existing underutilized buildings into permanent supportive housing to serve populations experiencing or at risk of homelessness.

To date, the Home Key Program has awarded over 3.4 billion to 267 projects and these efforts have resulted in almost 16,000 units projected to serve over 170,000 households over the lifespan of those projects. With the passage of the Behavioral Health Infrastructure Bond act In March of 2024, approximately 2 billion in funding has been allocated for the new Home Key plus program.

The Home Key plus program is administered by HCD in collaboration with the California Department of Veterans affairs to develop permanent supportive housing for veterans and other individuals with mental health or substance use disorder challenges who are at risk or experiencing homelessness and continues a statewide effort to sustain and rapidly expand permanent supportive housing.

A Notice of Funding Availability was released last November and HCD received its first application in February. And then finally the California Housing Accelerator Program, which was designed to reduce the backlog of projects stuck in that funding pipeline to accelerate development of housing for those most in need.

Accelerator funds were used to fill funding gaps in otherwise shovel ready projects that had received funding through one or more of HCDs funding programs but just really were unable to secure tax credits due to the competitive nature.

The California Housing Accelerator Program provided gap funding, ultimately to 58 projects which were stuck in that development pipeline with the needed financing to cross the finish line, so to speak, as quickly as possible and begin construction of additional 4,945 units.

At this point, I'd like to draw your attention to the PowerPoint or the information you have in front of you. It can take between this lists all the multifamily housing projects from the beginning of 2019 through the present. You see by program we've listed the amount of the total projects funded and the total units funded by program.

I would caution you that the total units funded is a deduplicated number. So as I mentioned in my previous comments, any one project can come into HCD for a multitude of funding sources. Typically we see at least two, sometimes up to four different funding programs that are accessed for any one project.

So when we count the total units funded, we're looking at a deduplicated number. So we're only crediting those units to that project to the most recent funding source. It can take between 3 and 5 years for a project to complete construction once they've received an award from hcd.

The table represents HCD programs and you'll see that we've divided it into three columns. One being awarded, not yet under construction, under construction and completed. Those programs with the larger number of constructed units have been in existence longer.

For example, the Affordable Housing and Sustainable Communities program first made awards in 2014, compared to the Multifamily Housing program for which the data counts only for the most recent bond funding beginning in 2019, and the accelerator program for which first awards were made in 2021.

So of the more than 60,000 units funded since the beginning of 2019, 31% are completed and occupied, 46% are currently under construction . An additional 4,250 units have been awarded and are creating that pipeline of new affordable homes that will continue to provide a significant infusion of affordable homes throughout California in the years to come.

These more than 60,000 units represented here that are either newly constructed or in the pipeline since 2019 alone are estimated to house approximately 135 Californians at any given time. One of the most critical parts of these investments, however, is that almost all come with a required 55 year term of affordability.

So it's not a one time public benefit over the course of the 55 years. A conservative estimate based on the normal turnover time frame means that these investments will provide an affordable place to live for more than 940,000 current or future Californians.

Combining this with our existing portfolio of units subject to the same 55 year long term affordability restrictions, that total increases to 87,312 units housing approximately 1.5 million current and future Californians over the lifespan of those properties projects. Thank you.

Thank you, Jennifer. Next up is Marina Wiant, the Executive Director of the California Tax Credit Allocation Committee. Welcome.

Thank you. Good morning. In addition to Executive Director of the Tax Credit Allocation Committee tcac, I'm also Executive Director of the California Debt Limit Allocation Committee, Sidlac.

And I was asked to sort of explain the role of the tax credits and how the Tax Credit program works, which is the base funding program of almost all affordable housing in the State of California. TCAC administers the Federal and State Low Income Housing tax credit program, LIHTC.

The LIHTC program was created by the Tax Reform act of 1986 under the Reagan Administration and is the Federal Government's primary policy Tool for the development of affordable rental housing.

In 1987, the state added an additional 70 million that has been adjusted for inflation of state credits to augment the federal program and allow us to create more units using the federal program. In today's dollars, that's about 125 million of statutory state tax credits.

LIHTCs are awarded to developers to offset the cost of constructing rental housing in exchange for agreeing to Reserve a portion of rent restricted units for Low income households. Typically, our projects are predominantly Low income that come in for tax credits.

By bringing private capital to the table through the credits, developers can take on less debt, which in turn results in lower rents. But however, the equity generated from the tax credit is rarely sufficient to fully close the gap.

And typically multiple sources of funding is stacked on top of the tax credits, which are the programs that Jennifer talked about and that Nevada also talked about. There are two types of the 9% program and the 4% program, which really refers to the amount of tax credits that can be allocated to each project.

The 9% being more tax credits than the 4%. The amount of federal 9% light tax that the state receives is based on a per capita formula. In 2024, California had 112 million 9% tax credits available for allocation.

While they're referred to in annual terms, this is really multiplied by 10, so it really comes to about 1.1 billion that we to allocate to projects. In 2024, just as a snapshot of the volume and the demand that we have on the program.

In 2024, we received 172 applications requesting nearly 349 million of that 112 million that was available, we were able to award tax credits to 55 projects totaling 3,232 low income units. And 23 of those projects also received the state statutory LIHTC.

The federal 4% program derives from a project's use of tax exempt private activity bond financing that's allocated by CDLAC, and those are limited by the amount of volume cap available to California. Similar to TCAC, the amount of bond cap a state receives is based on a per capita formula. In 2024, CDLAC had a total of $5.4 billion available to allocate its private activity bond financing.

In addition to financing affordable housing development developments, CDLAC programs are also used to help single family home buyers through the use of mortgage credit certificates and mortgage revenue bonds to build solid waste disposal and waste recycling facilities and to finance industrial development projects.

Taxes and bonds are issued by government agencies for These private projects and provide lower interest rates because of their taxes and status. But it's not like bonds the way our colleagues here allocate bonds.

In 2024, CDLAC allocated 93% of its total bond authority for its affordable Rental Housing program, which then works in conjunction with TCAC to allocate both taxes and bonds and 4% LIHTCs to projects that apply. In total last year, CDLAC received 354 applications requesting over 13 billion in private activity bonds. We had 5 billion available.

These projects total in total were awarded. So we awarded 138 projects of the 354 totaling 15,484 units. Those projects were also awarded 435 million of annual 4% tax credits. And 37 of these were also received the enhanced state credits of 500 million.

State enhanced light Tax are budget appropriated tax credits that we've received since 2020 due to work by the Legislature and the Governor. The state budget has provided this additional 500 million in state credits to be combined with the federal 4% Li tax for new construction multifamily projects. These are incredibly in high demand.

And as another snapshot, last year we received requests for nearly 2.2 billion in these state enhanced credits and only had 500 million available. Both of these programs are highly competitive and require the projects close construction financing within 180 days. And projects are typically placed in service within two years of that construction closing.

This is why TCAC and CDLAC is the last stop for a project as they're putting together their financing stack. Additionally, as required by federal law, TCAC monitors tax credit projects for progress in meeting these milestones. And projects are not allocated their tax credits until they've been placed in service.

Additionally, we monitor compliance throughout the entire term of the project's regulatory period. We are required to monitor for the first 15 years of the federal compliance period every three years and every five years for the extended period after that first 15 years.

When we monitor a project, we are checking, among many other requirements, whether the income of the families and the rents they are charged are within the agreed upon limits stated in the regulatory agreement. We conduct physical inspections to ensure that they are in safe, sanitary and habitable condition.

And project owners are also required to report complete and accurate project information to us annually. So it's a very robust program that we accomplish with about a staff of 100 people. Last year alone, we physically monitored 935 projects throughout the state, which is about 13,700 units. That's it for my presentation thanks so much.

We're going to close with LAO, but Paul, I'm going to skip ahead and announce Justine Marcus from Enterprise Community Partners to come forward. Thank you for joining us.

Good morning, Senators, and thank you, Chair Cabaldin, for the opportunity to be here with you all today. My name is Justine Marcus. I'm the state and Local Policy Director with Enterprise Community Partners. We're a national affordable housing nonprofit organization with two offices here in California with staff on the ground in the Bay Area, in the San Joaquin Valley, in Stockton and Los Angeles, and here in Sacramento.

For the last several years, our team has conducted an annual analysis of the pipeline of new affordable housing developments across the state, specifically quantifying the affordable housing that has already gone through that local process of community engagement, design local land use approvals, but is still awaiting funding that they need to break ground.

And you've heard several of my colleagues on the panel here talk about those specific projects that have been waiting in the pipeline.

So these projects include developments that have applied to and in some cases have already secured some amount of state or federal funding, but they still have that remaining gap that they need to fill before they can begin construction. So today I wanted to share a few of the key data points from our new analysis.

And I think you all have also this handout in front of you. So I'll walk through kind of the highlights here. Our analysis found there are 449 developments, nearly 45,000 affordable homes in the pipeline awaiting some amount of funding before they can begin construction.

We estimate that these homes would serve nearly half a million low income households over the next 55 years if they were able to be built, open their doors and have folks come inside.

About two thirds of these developments have already received some amount of funding from one of the state's competitive programs like the ones that Jennifer spoke to, which means they've already met the state standards for projects.

They've shown that they're highly competitive and for many of them, they could break ground within 180 days, which is around requirement of many of these programs that they're applying for.

I did want to note in light of the fires earlier this year that there are a significant number of these homes in the pipeline in Los Angeles and Ventura County, specifically about 9,500 projects. And I'm happy to speak more to that in particular if the Committee is interested.

And this really robust pipeline, I think reflects the, the great work that the state has done over the last few years to make it easier to get those local land use approvals to move projects forward. But it also demonstrates that without the companion investments, many of those projects are still not going to be able to start construction.

Our research estimates that to move the full pipeline forward, these developments need an estimated $1.8 billion in state sales subsidy and just shy of 600 million in state tax credits. Importantly, state funding. As you've heard, it's not the only funding in these projects, and it's really a down payment on much more significant leverage, federal and private dollars.

On average, over the last several years, the state has contributed about $168,000 in subsidies per unit that it funds. And for every $1 that the state invests, you're seeing $4 leveraged in federal and private.

So that means that, you know, for these specific projects in the pipeline, without the state funding made available, we'll lose out on around 9 billion in federal and private dollars. So our pipeline paints a pretty clear picture of the affordable housing production demand. So I'll speak briefly about the supply of state funds to meet this demand.

As has been discussed, previous state affordable housing bonds, as well as previous General Fund appropriations have been spent by the hard work of many of the agencies who are in this room today.

The two exceptions to that which will have money going out this year, Jennifer already mentioned the homekeeping plus program and the affordable housing sustainable communities program, which are really critical but highly targeted programs, so not necessarily a good fit for every project in the pipeline. And that brings us to look at this year's General Fund.

The Governor's proposed budget from earlier this year outlines a $229 billion spending plan for the state, and it does include no funding for any of the state's affordable housing production programs.

To put this proposal in context of the funding need that we found through our research, to fully Fund the state subsidy and state tax credit need for the production pipeline would require no more than 1% of the state's total proposed spending plan.

Without these necessary state resources, many of these developments will continue to sit in the pipeline for another year, Another many, many, many years potentially, which really means, you know, why we're all here today, is that these affordable homes will not be able to be made available to the people who need them, who are in need of them today.

Looking beyond this year, we're really grateful that the Senate and chair Cabaldin is authoring an affordable housing bond for 2026. And Assemblymember Wicks. If this proposed bond were to move forward, it would provide significant funding for several years, Although it would be available starting kind of as early as 2027. So we see this as kind of a companion tool to the near term budget allocations through the General Fund.

And just to close, I want to take a moment to recognize my broader team who helped do there's a lot behind this research and in particular my colleague Shania Santana, who's here with me today, who led a lot of this analytical work. So, so thank you for your time and welcome the opportunity to answer any questions.

Terrific. Thank you. And finally, Paul Steenhausen from the Legislative Analyst Office.

Thank you, Mr. Chair and Members Paul Steenhausen with the Analyst's Office. Happy to be here. This morning the sergeant distributed a handout overview of state funding for affordable housing production. So I'll speak to that. It's also on our website, Lao.ca.gov I believe there's some copies in the back as well, some hard copies.

I've been asked to provide a summary of state investments and recent recent budgets related to affordable housing production and hopefully gives you helpful context for the Governor's Budget, which was released last month.

Page one notes that page one of the handout notes that the state has subsidized or otherwise provided a form affordable housing production in three primary ways. You've heard about these ways through the previous panelists, so we can go through it probably faster. But you have bonds that states statewide voters have approved.

There's ongoing, there's a handful of statutory ongoing programs where the money goes for affordable housing. And I'll get into that. And then one time discretionary initiatives. Okay. So page one mentions the three relatively recent voter approved bonds. Two of them passed in 2018 and one of them passed just last year.

And you heard about a couple of these already from prior panelists. Virtually all funds from those 2018 bonds have been awarded or are about to be awarded.

And with regard to the Proposition one funds from last year, that's news to me that HCD received its first application and the plan is to start awarding these monies to projects beginning in summer 2025. So the bottom of page one lists three notable ongoing state funding streams for affordable housing production.

You already heard about the statutory low income housing tax credit for Ms. Wiant. And you also, did Ms. Seeger mention the Affordable Housing and Sustainable Communities Program, or AHSC? AHSC alone has provided about $500 million for affordable housing grants in each of the last few years. Those are programs that Fund projects seeking to reduce greenhouse gas emissions.

There's also one ongoing source that hasn't been mentioned, I don't believe, and that's also on the bottom of page one. That's so called SB 2 money and that's money from a $75 fee on certain real estate documents. That's been in effect for a number of years now. And most of that money goes to local jurisdictions for affordable housing.

Some stays with the state for some state level projects or state funded projects. So on page two you'll see here a description that in recent years the Legislature has provided significant one time discretionary funding for affordable housing. So you have the bonds, you have the ongoing statutory streams, but also something relatively unique in the last several years.

And that's this one time discretionary money that the Legislature has provided. Much of it is state General Fund. A lot of it was during COVID era with federal relief funds.

So this is money that like the American Rescue plan, money that the Federal Government gave to the states, including California and California Legislature chose to use a chunk of that on foreign affordable housing production. The table on page three has a lot of information. It's really for reference purposes.

But I just wanted to point you to the bottom Line. Since 2019-20, the Legislature has provided about $12 billion in one time discretionary monies for various programs. And actually a number of these programs home key you've heard about already from prior panelists, multifamily housing program and others.

You can see on that table on Figure 1, page 3 that annual amounts peaked in 2021-22 and that was particularly with the support of federal American Rescue Plan Dollars. But you had relatively large amounts in the following two fiscal years as well.

As page three shows though you'll see for 20 the column for 202425 the state did commit to another $500 million discretionary or supplemental Low Income Housing Tax Credit for 2425, but did not provide any other discretionary funding for those programs.

In fact, just to go back to page two, you'll see the note there that due to the state's budget problem in the 24-25 budget, the state ended up reverting $641 million in funds that had previously been appropriated for affordable housing. And so the Legislature in the need to identify budget solution, identified this money and reverted it.

And the amounts on the table on page three reflect those reversions. Those are net amounts. Did want to just mention though that the Legislature really did push back hard on a couple of the proposals that were in the Governor's Budget in May revision last year, including a substantial cut to the multifamily housing program that Ms. Seeger mentioned is kind of the flagship for HCD. Legislature pushed back pretty hard and ended up only having a $10 million cut to it versus it was going to be a few $100.0 million to that otherwise.

Finally, just to conclude for the governor's January budget for 2526, Governor, the budget does not propose any discretionary spending proposals for affordable housing in the budget year. Same time it doesn't have any reduction proposals. So just keep that in mind. Thank you and happy to answer any questions.

All right. Thanks, Mr. Steenhausen. Thanks to the panel. Let me open up our questions for Members of the Subcommitee for the panel, any of the panelists, Senator Neillo and welcome.

Thank you, Mr. Chair. We have a lot of information here relative to the available funds and financing of affordable housing. We're not talking about the deployment of those funds funds, and it's not part of the presentation, so I understand. But a concern of mine is the cost of affordable housing projects.

Those that I read about, particularly those that are financed by public entities. The unit costs seem to be quite high on a per square foot or. Or per unit basis. Even more expensive than private home builders that are just building in the marketplace of their own free volition as to how to pursue their projects.

And about a year ago or two years ago, I read an article of a Southern California developer who developed an affordable housing project with no government involvement at all and privately sourced funds for unit cost that was significantly below that which we usually see with affordable housing.

So we have a lot of resources going in, but if there's any truth to what I just said, there isn't a truly efficient deployment of those resources. If they were more affordable in their building, we would be able to build more of them and then have more affordable housing. Would anybody care to comment on that?

So you know, we looked at sort of the average price per unit and it's in like the 500 ish $1000 price point. But I will note that like it includes there's a lot of public benefits that are wrapped up in that cost, including the reduction of rent compared to like a market rate unit.

So we're kind of capitalizing that rent reduction at the front end. And you know, that particular example, like we were really struggling struck by that example prior to me being in this role and looked a little bit deeper.

And it's a bit of a misnomer that they claim that there was no public subsidy involved because most of the, all of those tenants were receiving rental subsidies from the government. So that's where like sort of that it was. They were able to have that lower price per unit because they were not capitalizing those rent costs.

They were essentially being able to rent it at market rate but to low income folks because of the rental assistance.

Would you explain further the capitalizing of the rental costs? I'm not sure that I'm getting that.

Yeah. So you know, because all of these projects are limiting the rents at a certain affordable rental rates, there's only a certain amount of rental income that can come in through the life of the project. And so that creates, that is not a sufficient amount of rental income to cover the operating costs of the project.

So that gap is often is funded at the front end using these various subsidy sources to sort of, we're at the capital point to fill that gap that allows the rents to be less in the long run. So it's not just a cost of like sticks per bricks, sticks and bricks of building that you're comparing. It's the fact that we're reducing rents, we're providing services and the like.

There are more aspects to the issue than that, I would imagine.

From a developer perspective, many of these, because they are public projects are just loaded up with every single public policy issue that one could imagine. So there's often a, a labor requirement. There's often cities that really want to see zero carbon or beyond even net carbon.

They want to see zero carbon and a variety of other things that, including programs that prioritize housing that may be near transit or in kind of the more of a downtown urban core. So you're not building a two story walk up project necessarily kind of in the outskirts of an urban area.

I'm thinking around like, you know, the difference between a Gilroy and downtown San Jose. So it's also potentially a different building type. So you can't. You may need to have, you know, two floors of concrete and an additional five floors in order to meet some of the other goals that we have around transit ridership.

And so there's a variety of issues there that there's a confluence in what the state's incentivizing.

So we have a public policy that is encouraging the development of affordable housing that is handicapped in terms of it being affordable and also the number of units that we can build by also public policy.

In some ways. But at the same time as Maria was speaking to, there's also how you weigh that public benefit relative to that.

I get that. I'm just raising an issue that has always my questions are somewhat rhetorical, as you probably can tell.

I'm raising an issue that has always frustrated me, that we have a public policy that wants to go in one direction and we have other public policies that pushes it back and it's not logical if truly we which is more important, a larger number of less expensive affordable housing units or the public policies that drive the price of those up?

Which one's more important? Now that's not a rhetorical question. That's a policy question. My answer, I'm quite sure would be somewhat different than my friends on the other side of the aisle. But it's still an issue that in terms of looking at our public policy, our affordable housing public policies, I find frustrating. Thank you, Mr. Chair.

Thank you, Senator.

Can I add one. Just point to your original question, if I may. I did want to say for if you have naturally occurring affordable housing to the example that you were citing where there are no state subsidies in that project.

The thing that we're getting for our investment is we have regulatory agreements on these properties for 55 years. Right. So we're ensuring the long term affordability of those projects, which you're not necessarily going to see in a project that might not have the subsidies. So we're getting the long term benefit.

We're going to see maybe 678 households that are going to benefit from that investment over the lifespan of that property.

My only response to that would be we could still do the same thing with the public involvement on the affordability side and waive the public benefits, if you will, on those issues that are driving costs up. That could still be done. That's a policy decision that we're not making

Thank you, Mr. Chair, and thank you for your presentation. And I want to say I was very impressed with the forecast and sort of the ways in which you were able to monetize the benefits of our programs and the long term impacts on communities access to quality housing.

I also want to note that these are also jobs that get created for communities that we need to factor in. To my good Senator's point.

And the long term what we want to see is the reduction of folks sleeping on the streets which create a whole multitude of other revenue extracting outcomes that we are trying to delicately balance. Because my question is about the federal leveraging piece and what are some of the implications of what's happening now in Washington on that?

Certainly we are hearing by the hour some threat threats to the access to those funds. And just if you could talk a little bit about what what does that look like now and what are the ways that California will will be impacted? Is it in terms of our having to increase commitments or stop actual our progress?

So if you could share a little bit about that and I have a couple more questions for you so you.

Know I can speak to a bit of that. I can't fully forecast what's going to happen.

And you know, every day things change with for the Low income Housing Tax Credit program because it has enjoys such bipartisan support at the federal level and because it's structured as a tax credit, I think generally we are optimistic that that is not sort of on the cutting block.

We, many of our colleagues who work at the federal level I think are still having a very kind of aggressive approach to. They're not playing defense.

They're still offense of trying to get additional changes into the tax Bill that would support, solidify and continue to ensure that we're able to do the work that we're doing here in California using the tax credit program.

The negative at least on our program would be that because of the tax reforms the credit pricing by the investor community will go down. What that really just means is the amount of equity generated by the credit is going to be less than before.

Which means that some additional projects that maybe were pencilable or without additional soft funding sources from our HCD or from local governments, we'll have a harder time moving forward because there will be additional gap created.

The other programs I think that are more run through HUD I can't comment on but just anecdotally what we've been seeing is there's a lot of concern from projects that have HUD funding in them that they're going to have a harder time closing their construction financing in time to meet deadlines because of the uncertain nature of of those funds.

Just to add on, I would agree with all of that. I do think that the state subsidy contribution at a time when the federal corporate tax rate might see some big changes is going to be especially important.

My colleagues who do work on DC are optimistic, though, about actually getting some of the changes with the Low income housing tax credit through the upcoming reconciliation potential tax package this year.

And that would include, you know, expanding the 9% credit and lowering the kind of bond test cap, which really unlocks a lot more federal 4% tax credits for us. So that's actually one of the bright spots of opportunity that I think we're all trying to orient towards at the federal level.

I would just add that some of these provisions that are being referenced here actually made it into a tax package last year that passed the House and was unable to progress in the Senate and 85% of the House voted yes on it. So it was tightly scripted. It is indeed incredibly bipartisan.

And beyond the tax credits, the Federal Government provides project based vouchers and a variety of other types of vouchers. And those are also incredibly important. And it also is not bipartisan. No district, every single district has this tool in it and the people who use that are so vulnerable that there's incredible pressure to preserve that.

My other question is we talk about what we're producing. How are you looking at, you know, what's our goal? And if you could talk a little bit about, you know, 60,000 units is, you know, is strong and it's substantive and it's going to have impact.

But what are in terms of forecasting what needs are, especially as we're looking at no investment right from the state this year. Can you talk a little bit about what the need still remains and where we're trying to strive to in our sort of multitude aggregate of all of these projects in terms of addressing the need?

Well, I can start. I mean,

Let me also ask because it is a very direct question that we, to the extent you can defer to one another just to keep us moving. So we don't want to get five answers to what the number question is. So.

Well, I guess I'll just say that the state has its kind of regional housing needs allocation goals for all types of housing, including affordable housing, which has called on communities to produce a total of about a million affordable homes by 2030. And I think that that is kind of the North Star that we're all working towards.

We're obviously quite a ways away from that. And I think that's where, you know, predictable, ongoing and hopefully, you know, increasing Funding, that's what can allow kind of that, that pipeline engine to really ramp up and start to produce at a greater scale. The kind of dips and valleys of funding. It makes it really hard for developers to start to move towards that goal.

All right, thank you. All right, thanks. Thanks. I have a couple of questions, but, but also a lot was already answered by the panel with respect to this context. So just, you know, for some background. So the first ASIC project in the state to break ground was in my city.

We were one of the first no Place like home projects, the first homekeep project for one of the first IAG projects. This is. So these programs are incredibly effective. They work, they're impossible to navigate. And so I would just say, first of all, I think I represent a district that's not in LA, San Francisco or the East Bay. Well, I have a little bit of the East Bay, but the suburban part.

And I'll just say that in terms of sort of community wealth building the community entrepreneurial ecosystem, it's almost impossible to be anything but a statewide corporation for nonprofit housing development.

And, and our partners do a great job, but we, we would have a much more diverse, innovative entrepreneurial housing environment if we didn't create a system where so much of our energy was, was deployed towards complicated regulations.

And then I think importantly for this panel, just, it's the uncertainty of these, these funding streams, both in the macro sense, but even for any particular project where you are, you're applying for source after source after source. That source says you have to start construction here. You have to have this. And so you are. And you have to set capital aside, you have to set land aside.

If you're a local government on the hope that 17 other contingencies will come together within that time frame that makes these projects require heroic, heroic leadership and commitment at the local level, as well as a massive amount of expertise and equity from the, from the nonprofit and private sector partners.

That's a, it's an enormous challenge that is exacerbated by this, the budgets that we have had this in the current year and proposed for next year, because as you've indicated, so many of these projects, it's not just that they will have to wait another year or two on the hopes that maybe our budget will turn around or when the bond happens, but they will fall, they will unravel, they will fall apart.

And then we'll blame NIMBYS locally because, you know, they tried to shut, they tried to get the land rezoned or what have you. But it's not their fault. The problem is we're not able to deliver on the projects that have made it halfway through or three quarters of the way through.

So, so I do think this is, this panel is really important in helping just to shine a light. It is the total amount of money, but it is very much about the certainty of the money, the coordination of the money. And I know a lot of efforts have been on taking it that way.

I will also though agree with Senator Niello that it is also about the hard cost. And I think listening to the dialogue, we're constantly talking past each other. I think Senator Nilo's talking about the cost of land acquisition and construction is too high.

And I really appreciated your very direct insight and answer, which is we have at the local and the state level said if we have a project that's affordable and there's $1 of public money in it, then it should include every value that we've ever articulated in law or in a speech or in the State of the state or whatever, everything that we all desire.

How could we possibly build a project that doesn't have a rooftop garden and a solar panel and you know, has a transit stop for a transit line that will probably never get built? I mean, how could we possibly in good conscience build such a project?

And so then we don't, or we spend the money doing all those things that as Senator Niello suggested, diminishes the efficiency of that, of those very limited uncertain dollars in actually delivering housing and accomplishing the public benefits and the goals that you and Senator Small Cuevas have outlined.

So really appreciate you bringing this forward and the comments on LIHTAC as well. And the issue being both the federal dollars but also the federal our ability to leverage those dollars given the rest of the tax Bill.

Just to be direct, if you have a huge amount of money and your taxes are lower than the tax credit is just not worth as much so we're not able to leverage that as much.

So for Jennifer, which of the HCD programs, given where we're at with the one time funds and whatever, which of them are able to issue awards in 25-26 if the governor's proposed budget were to be adopted?

So as I mentioned, we have a NOFA calendar that's published and available on our website that NOFA calendar pretty much makes available or announces the time frame for when most of our state funded programs will be exhausting all of their funds. We have multifamily. We have the multifamily super NOFA that was just issued.

We have affordable housing and sustainable communities NOFA that will be going out in about a month or so. And then the Home key plus NOFA that was released in November and that's on the multifamily side. That's about it for this year.

And so how, how is the Administration? I'll ask the Director of this probably. But so I'll just, you know, obviously the question will be how are we going to accomplish the objectives that the, that the Governor and the Administration have laid out for and that we have obviously supported as well.

But for the Governor and the Administration, it's not clear at this stage. Hopefully the Director will be able to provide us some insight. How will we get to the aggressive but really critical goals that have been outlined that we've laid out without making those any investments in that current year?

I think I'll hold the rest of my questions for later in the presentations today, but I really, very much on behalf of the Subcommitee want to say thank you to the panel. This is a Great start for 25-26 in presentations.

Maybe not in, maybe not in the, in the numbers, but we'll be, we'll be working on that as well. Thank you so much. All right, next we're going to turn to. Are we going to take the vote only at the end? Okay. So we're going to turn to our agenda items for discussion.

So we're going to start with the California Tax Credit Allocation Committee first, then we'll proceed to HCD following. Of course, it's obvious because we were all just here together. But for all the folks that are presenting subsequently, if we can just stipulate to what we already covered in the panel presentation, that would be great. So welcome back.

All right. Yes. Thank you for having me. As I mentioned, you know about the tax credit program, the Governor's Budget has ongoing increase and I'll just note we're specially funded. It's not a General Fund increase. We are specially funded using application fees at TCAC and monitoring fees.

We have a request for three additional staff to handle increased program workload, including expanded duties created by the adoption of AB 2006. I'm happy to answer any questions.

Yeah, that's, that's our vote only item for later. So at the moment we're covering just the overview, which I think you just stipulated to, and then the supplemental low housing tax credits.

Oh, yes, I think I have an old copy of the agenda before me. So. So as noted in my presentation earlier. Since 2020, we have received an additional 500 million in enhanced state tax credits, which gets paired with the 4% tax credit program to increase the amount of projects that we can finance that are new construction.

As I noted in my presentation, there is significant demand for this program. We had 2.2 billion in requests for 500 million of state credits in last year alone. This January budget did not include that 500 million. Yes. So that's, that's the item before you for discussion, I believe.

All right, Are there questions from Members of the Committee? All right, so I wanted to ask you about the, the impact of the LA fires on the program and vice versa. Can you give us an update on how that's affecting the projects that you've already greenlighted?

Yes, absolutely. We were very lucky during the fires. We reached out to every project. I think we had about 50 projects that were in the General fire vicinity. None of our projects were lost to the fires.

We had a handful of projects that had some loss to units due to smoke and other issues, but overall did not a huge impact to the actual units themselves. And in fact it was quite miraculous. We had two projects under construction in Altadena, that one suffered some fire damage but was not a total loss.

So again, really have persevered in coordination with the Governor's office. I know the Governor recently issued a request to the Federal Government for disaster relief aid. And included in that ask is an additional 2 billion of 9% disaster tax credits that would help in the recovery in the LA area.

And it would allow us, you saw the pipeline data, it would allow the tax credit Committee to allocate an award. Almost all of the pipeline that is ready to go and is shovel ready in LA should we get those resources.

In previous disasters of the fires in 1718 and 2020, TCAC received close to 2 billion in additional 9% tax credits for disaster stricken counties during those five. And we were able to quickly deploy and finance up over 5,300 units using disaster credits in 2020 and 2021.

In addition, we have a bunch of resources like sort of flexibility available for projects that are in need that are having closing deadline delays due to fire impacted areas and the city services have been impacted as well as like the utilities have been impacted by the fires.

So we have given some some discretion to help those projects meet their deadlines.

In the panel presentation, you know you had 100 folks working at. Is that between both this and CDLAC or. Correct. Okay, so is it 78 in 78 at TCAC?

And 20 ish 22 at SIDLAC.

And I think from one of the BCPs indicated that there were 20 vacant positions out of the 78. And reading that, that is updated.

So those numbers, we did have vacancies in FY23-24, 22-23 of that number. We are fully staffed today by filling the vacancies.

They weren't swept. They were not swept.

Okay. If there's no further questions, thank you so much on both 5 and 6. Other comments from Finance Lao.

They were filled.

All right, then. As we're taking public comment Department by Department, I'd like to invite anyone that wishes to provide public comment in the audience to please come forward to do so on the Tax Credit Allocation Committee and the LIHTC program. Just state your name and affiliation.

Mark Stivers with The California Housing Partnership, and I'll speak later to the General State of affordable housing. But with respect to the tax credit program, those state tax credits are the most efficient way to increase the production of affordable housing and bring down some of that pipeline backlog that Justine talked about.

So there is one competition going to your point, Chair, about trying to have one place where we can get all the state resources for development that we need. The tax credit is these. The enhanced state tax credits are the best way to get to that through one competition. So it's the most efficient way to increase production. Thank you.

All right. Anyone else wish to provide public comment? Welcome.

Good. Good morning, Senators. Just wanted to say I'm here in just a second. My colleague on behalf of the California Housing Consortium. Thank you.

All right, great. Actually, a question for maybe for Ms. Wiant or Ms. Seeger. So if. If without the half $1.0 billion, if that wasn't to make it in the. In the budget that, as the Governor has proposed, do we. Do we have a sense of how many of the projects that have already secured an award from one of the other state programs would fall apart if we had no tax credit allocation for. For the upcoming year?

So a couple things I know is last year's allocation of the 500 million for FY24-25, we allocate in calendar year 25. So it won't have. There'll be no impact to what we can. Our production numbers for this calendar year. It would have an impact next year. I know. And Prime. Ms.

Sieger can speak to this a little bit better. I know HCD has been really pushing projects that are receiving HCD resources to not rely on state credits because of such a high competitive nature.

And in order for those projects to be more successful in the competition this year, we had 34% tax credit rounds or planning for three. Those are. The 4% program is, as I noted, what the state credit pairs this 500 million state credit pairs with.

And the first round, just due to the sheer demand on the program, we did not accept applications that were seeking state credits in round one. And we had still had an oversubscription rate of two and a half to one.

So there's a lot of projects that have been rejiggered and revisioned in light of that competition and I imagine some of that will change. Again, Ms. Seeger can speak to this, but I know Homekey plus program does have a gap filling program that is available that might be available to help some of those projects.

Okay, a follow up question. So it's the over subscription in those projects that just didn't even get the funding that because of just the lack of resources. And then. So those are projects that are tech.

One would say they would be competing in the coming year where we don't have the state investment and then of course, whatever new projects.

But my question is if there are projects that are in construction that say they've done, you know, sort of the foundation, you know, are there projects that are just going to be sitting there that are not going to actually be able to finish con. The.

The actual constructing of the units will be halted and the interruption of the actual project versus a new project being funded and started. Okay.

Projects under construction have all of their financing committed and secured.

Got it. So there aren't. It's not a situation where things are going to not be completed. Okay, thank you for that.

I would just add that yes, we did stop incentivizing projects to rely on the state tax credits about maybe I think two or two or three years ago now some of those projects are still in that pipeline. Right. So and each year that we don't have those resources, we're just adding on top of it.

So we do definitely have that pipeline. We've stopped incentivizing it, but folks are still moving through. Yeah.

All right, thank you. All right then we're going to hold the open the item open and proceed then to our agenda, item seven, which is the Department of Housing and Community Development. So the department's representatives, please come forward.

Welcome. Good morning Mr. Chair, Members, good to see you again. My name is Matt Schueller. I'm the Deputy Director of Administration at Housing and Community Development.

Touching on the first item, the agenda does a really good job of outlining our mission and our programs at a high level in terms of our loan and grant programs, our regulatory and oversight functions and also our work in housing policy and accountability.

So in the interest of time, perhaps maybe I can just answer any additional questions or invite colleagues up to address any additional questions regarding our structure or what it is that we do and also any other questions that you may have.

Okay, great. Thank you so much. So we're on the overview and the status report item. Let me turn to see first if there are questions from the Members of the Subcommitee. Yeah. So in the more General at the moment, can you give, you heard me just ask about the LA fire situation.

Can you give us just an update on sort of at the global level where we're at with where he is at in terms of progress and challenges?

Certainly, certainly. So with respect to the response to the unprecedented wildfires that happened in the greater Los Angeles area, we've been involved in a deliberate and comprehensive effort to address impacts and work towards rebuilding just as quickly as possible.

Disaster recovery is smoother if HCD is working in and involved in hearing community needs from the beginning on the ground. And for that reason we've reprioritized our work. We've participated in working groups and task forces as applicable to our work.

That includes the housing rebuilding and recovery task forces that are led at the county level but supported by the state.

We've worked on the implementation of the Executive orders that have been promulgated and we've provided technical assistance and best practices to local governments who are affected by the disaster and work closely with our agency who coordinates amongst our sister departments and agencies. Additionally, HCD has issued administrative relief to fire affected communities where possible.

So in January we afforded roughly a dozen different administrative reliefs in terms of extending deadlines for our available funding, we've extended deadlines for our reporting and accountability actions in the area. So that at a high level really is the areas in which we've been responding to the fire.

One of the challenges I know Senator, Smallwood Cuevas and I have both been paying attention to is the. In both Altadena and in Palisades have been the issue of mobile home parks and their ability or inability to rebuild and questions and ambiguities about that commitment. Do you have any new information about this question about the. Are you familiar with the challenges that have been happening there?

Yes. And there were three parks that were lost in the fire. And one of the Executive orders is directly related to to the issue of rebuilding of the mobile home parks. Executive Order 925 requires HCD to meet with local government and come up with guidelines for expediting the permitting of reconstruction for the damaged mobile home parks.

We are required to develop and submit a report that includes those joint guidelines to the governor's office by 13 March, which is on track to be submitted to the Governor's office.

And just a follow up question on that.

In terms of the MRLPP program which you all administer, is that as part of Wildfire, is there also an extension of what that is to assist some of those residents and in some of those parks that have been impacted by fire in any of the disputes or helping them through whatever insurance process, are you all supporting some of that work?

And then I have another question and I just want to make sure in terms of future builds, is there a way that sort of the fire mitigation, are there extra steps that are being thought about in terms of the ways that you are helping to implement opportunities for residents to be able to have greater protection in light of these kinds of disasters happening in the future?

And how does that also affect your budget? Is some of that additional legal support and some of that additional sort of, you know, rethinking how we rebuild know what does that add to the cost of the services that you're providing?

I would say with respect to MRLPP, I would have to check with our program and get back with you specifically because of want to make sure there aren't implications with respect to the length of that program.

I don't know that information off the top of my head, but it's a very good question and I'd be happy to get back with you and with staff regarding the answer of the availability of that to the fire impacted victims.

And then with respect to, you know, provisions in those guidelines, these are things that are being considered as those guidelines are being developed. So that is something that is first and foremost in our minds about how do we get to a better place with respect to the construction of those of those properties?

How are, how are insurance rates affecting the state's affordable housing portfolio from HCD's perspective and particularly with respect to impacting new projects and the financing of those.

Projects for an answer to that question. I might look to one of my colleagues.

I think for. That's a fairly longer discussion so probably we shouldn't get deep into it today. But I'll just say yes, like insurance rates are rising but there's, and certainly that's affecting the affordable housing community just like it's affecting the market rate development community. But also California is vastly ahead of the nation in its fire regulations.

So when we build new housing in California, that is to informed by fire science backed regulations that really helped act as a panacea against future loss. And so our new housing in California is something that people can feel really strongly about from a fire safety perspective.

And so there's a lot of things that are working in California to make sure that we're in a good, good position there. But of course it's, it's part of the many things that go into costs that we're always trying to work on.

And I, I, I share your level of appreciation and confidence in what we're building. Does the, do insurers treat affordable housing projects in with that same level of confidence and then equity with respect to market rate projects?

I think that's not something I'm comfortable probably getting into getting into today. I think, you know, that's something we could prepare a briefing on with additional background materials and come to you with a more fully thought out response to that.

I think I appreciate that and I hope you do. What I'm hearing from a lot of our affordable housing developers is that they are not able to access insurance for their projects, which is adding to delays.

And it's one of those things that we can't find a lot of research and it's hard to get clarity on what is actually happening. But as we know, funding and efficiency is a part of our challenge. And now insurance is becoming part of our challenge in some of these developers being able to get the clearance to.

Actually, and obviously that's something that's far beyond the work that HCD touches. And so I think just, it is important when we have a conversation like that to really make sure you get to hear from a broader part of the Administration as well that's working on those issues.

But it would be in your interest to be able to share that as developers are seeking funding and putting proposals together to understand some of those challenges and potential delays down the line.

So I, I appreciate that it might be in a different purview, but in some ways getting to that 1 million unit, this is another thing that is preventing.

And so I, I, I, I see your point, but I think having some expertise and sharing that with this community, particularly those who are coming to you for funding, I think it's important for them to, to have that information and, and I certainly would love to see more.

That's right, yeah. want to make sure we're in partnership with the insurance Commissioner and the Department of Insurance when we, when we talk about these things so that we, yes, like at HCD, both on the affordable and market rate side, we're con, we're concerned about all parts of the cost equation and that, that's a really multifaceted, that's a really multi, multifaceted thing.

We'll talk a little bit more about that later, I think. But you know, we just want to make sure we, to get you those, those good answers. We want to make sure that we're also bringing people to the table that are working directly on insurance conversations all the time.

Yeah. To put a finer point on the one of the specifics, and this is really more, it's more akin to a fair housing issue than it is just the overall insurance market. To the extent to which developers or owners of affordable housing projects are basically dinged because the product is affordable or deed restricted.

We're hearing, you know, reports from affordable housing developers and operators that this is a, this is a, so it's a specific problem to HCD supported projects in addition to the big, you know, as you described, the sort of the statewide and national crisis in insurance. Senator Niello,

Thank you, Mr.Chair. With regard to recent initiatives, the Housing and Homelessness Accountability Unit, any measurable or measured outcomes with regard to that at this point?

Yes, we can, we can speak to that. We can speak to that. But I'll say, you know, we did a presentation recently on this topic, so I'm happy to share that with the Committee also.

But you know, some of the things I think are important to realize, especially when you're in the Legislature passing all these laws, you got to wonder, you know, what's working for us. We'll talk a little bit about the housing data in a later item, but some of the results from that data.

Completed residential construction is up by 13.1% from 99,000 in 2022 to 112,000 in 2023. Construction has been up every year for six years in a row. Our ADU production continues to increase to record highs. We are now at more than 20 more than, well, nearly 28,000 ADUs in the 2023 data. Affordable housing especially is up.

The lower income units in new development have nearly doubled since 2018. They now represent nearly 20% of the permitted units and 16% of the completed units in 2023. The very Low income unit completions increased from 44.2% from 2022 to 2023. Just. That's a big number. So I'll say it again. 44.2% up in very Low income unit completions.

Low income unit completions rose by 75.7%. And so together we've seen a 61.5% overall increase in affordable production.

The, the time factors, and I think this is a place where the Housing Accountability Unit has, has made a substantial impact as well, is the time from application submittal to entitlement has come down with the average timeline in 2018 was 145 days. We now have that down to 64 days in 2023.

So that time savings is incredibly important in bringing down the cost of housing in California and also bringing new, new folks to the market in California. When the timelines are really high, we have folks who just won't, won't come here to build. Right.

The entitlement to permit processing time is down to 85 days and the construction phase has shortened by 33% since 2018. So you, you should all feel some feelings that the laws you've passed and actually holding people accountable for those laws is having a very strong impact in terms of housing success in California. So, you know, we're quite proud of that work. . Yes.

How about with regard to homelessness?

With regard to homelessness, and I don't have the number sitting in front of me, so I don't want to miss quote myself, but I, I, so I won't say specific numbers on that one, but overall, we beat the nation by quite a bit in, in this is, this has been a time where, you know, we've seen pretty stark increases in homelessness and California has really been an exception there.

We have reasons to be fairly optimistic that some of the policies that I was just talking about are at the beginning of their impact point. And so we have some reason to believe that they're going to actually ramp up in terms of their success as well. And what the research shows is housing. Homelessness is a housing problem.

Right. That when people are paying too much of their income toward housing, we see two big housing policy problems happen. One, they don't have enough buffer to save up for a down payment. So we see lower homeownership rates.

So, like, as counterintuitive as it sounds, building more multifamily housing, affordable rental, multifamily housing actually increases homeownership substantially because it allows people to have that buffer to save enough for homeownership. Simultaneously, that cost burden housing problem drives homelessness.

When people are paying too much of their income toward housing costs on the lower income side of things, that means they have no buffer to weather the emergencies and the shocks that happen to everyone. So the car breakdown, the medical issues, if you don't have a buffer, that can kick off a cycle of homelessness.

And so that, that is also the thing that we know we need to tackle is we need to get cost burden down to solve the homeless crisis in California. And you know, we're going to be talking about that at the next homelessness, the Senate homelessness hearing in a week or too as well. So we'll give more information on that there.

Thank you. Focus of our hearing in two weeks. Two weeks, yeah. Some here as well. Okay, so a couple of other questions. So one follows on what was just described in terms of some of the state policies that have occurred that's sort of in the housing element review at acd.

You know, one of the, in setting aside, you know, I come from a very strong housing producing city, then there's a bunch that, you know, need to be in court, but there's the vast majority of cities that are in between and many of which are struggling with their housing element processing.

Not the content, but the time in which it takes, the clarity, the sort of going to deli and hoping you get the right analyst. Like what is, how is the Department, what, what are we learning? And then how is the department's approach to housing element review? Review and certification? How's that proceeding?

So that's in my, my division, the housing policy division, where we work with locals. I'm proud to say we now have more than 80% of the state in housing element compliance.

You know, it is on a rolling cycle and so not everybody comes due at the same time, but everyone now is, is at least in, in the sixth round of housing elements. You know, we do hear that, we do hear that folks want more support, that you know, that they feel like it takes too long.

But I would say the counterpoint to that is this is the first cycle where we really help people. You know, the law changed in a good way. It was really necessary to get to a place where we, we really followed housing element law, which means to set the table for the true housing needs.

So this was the first cycle that didn't pretend that the whole crisis had been fixed. When we set the housing need number right, that was how we used to do things. We used to say, okay, assume everything's fixed. How much do we need to grow by in the next eight years?

Well, this is the first cycle where we said, actually you need to look at pent up demand. You, you need to look at where you have super Low vacancy rates, you need to look at where you have other factors that show real high housing demand. And let's get to what the real need number is.

And so folks did have to plan for a lot more housing this cycle, but it was appropriate to do so. And there were numerous other changes that really act as this net that get us to those new numbers that you were hearing that get us to those improvements.

The housing element was harder this cycle for jurisdictions, but it was harder because we can feel confident every jurisdiction that comes into housing element compliance.

This cycle is doing the proven strategies they need to do is closing, is eliminating those constraints to housing, is developing programs to set that table for housing much more appropriately than we have in the past. And so it was harder, and we feel that.

But, you know, we're now looking at more than 80% of the state that has. Has gotten there. Right. And we're working really directly with jurisdictions to get all those that are not in compliance into compliance.

I think it's really valuable when you hear from your constituent jurisdictions that are not in compliance to look at when was the last time they submitted a draft to hc? Right. We see people that kind of haven't submitted a new draft to us in a year. Right. That doesn't.

That is not showing us that you're making active progress to try and get across the line. We're really, we're really trying to get jurisdictions to. To come in to ask for help. We have consulting resources available. We have technical assistance available.

We have for every new law that's been passed since 2017, we have technical assistance guides to help jurisdictions follow these new laws. And so, yes, it has been hard, but the help is there. And we're willing to work with any jurisdiction that wants to get into compliance because that's how we get these numbers into better shape.

When, when the jurisdictions come into compliance, the timelines go down, the housing goes up. We see the state's affordable housing dollars that you all were referencing earlier stretch further. So it is incredibly important that we not just bring new financial resources to the table, but.

But that we make it easier and less costly to develop housing in California. And that only happens when we bring jurisdictions into housing element compliance.

Okay, well, we can agree to disagree on that part, because I think the, this idea that everyone is incompetent or evil until HCD fixes them is wrongheaded.

That we need a approach to the state local partnership that recognizes that no AGPA and HCD has all the answers and that there are communities in the state that are talented, innovative, committed, at least as much as we are to the answers.

And so a system that both assures that minimum compliance is achieved, but also doesn't suffocate or drag out jurisdictions that know that as good as we are, but are often trapped. I mean, this is not a housing issue alone.

This is just a government problem where we often regulate always to the bottom and therefore prevent the best outcomes from emerging. So the complaints I hear is mostly because people don't bother with those kinds of complaints with me. Because I've done a bunch of housing elements.

The complaints isn't that it's, that it's too ambiguous and that the ACD part of the process is too long. The standards themselves are not the issue. And so it's. Please follow up on this. But I wanted to then take it the next step, which is that. And it's for acd, it's more for an answer.

Maybe it's just for our ongoing deliberations, which is that because of all of the outcomes that you described in terms of entitlements and what have you that have been partly the result of the increasing focus on accountability, the next major area of accountability is on those of us that are to pay for it.

Producing more and more and more entitlements at the lower end on RHNA does not get us housing by itself. And so as we, as we focus on holding, you know, Ledera Heights and Folsom accountable for their, for their zoning and for their entitlements and for their processing if we don't.

And it's, this is why it's completely unclear to me how the Administration believes that just accountability at the local level without then taking those doing our part of the job in the relay race of taking those projects then to actual construction and opening so that people can live in them.

How, how we could spend zero money right at the moment where we've, where we've gotten everybody in California developers and localities to do what we said to do and now it's our job to do, to do our part and we're proposing to spend nothing.

I mean, I, I would be remiss if I didn't mention the $1.0 billion that my division is implementing for through the Homelessness Housing Assistance Program as well as, as my colleague Jennifer Seeger mentioned, the, the 14 billion that we have put out for multifamily as well as the homekey plus money that's on the table right now and then the affordable housing sustainable communities funding along with the permanent local housing allocation that is an ongoing resource and then bringing budget neutral solutions to the table like the, like the excess equity program that you have on your agenda today.

So you know, it is certainly not a no resource environment right now from our perspective, but heard on that, you know this, the, the importance of that investment in, in building affordable homes directly. So thank you.

All right, thank you. Other questions. Do we have, do we have the excess properties item up or is this the moment to talk about it on? Great. Thank you. Thanks, Tim. Okay, let me just. Quick check. I think that's. That's it. Thank you so much. And we're going to move on then, to item eight.

You get to keep me for that. Okay, great.

All right. Which is on recent data analysis collaborations.

Joined by a colleague from the Office of Data and Innovation for this fantastic welcome.

I'm not sure I properly introduced myself before because I overset my colleagues. So I'll introduce myself more properly. I am Megan Kirkeby. I am our Deputy Director for Housing Policy at HCD and I will let my colleague from the Office of Data and Innovation introduce himself and then talk you through this item.

Thank you. First of all, good afternoon. I want to thank you, Mr. Chair and Committee Members for inviting us today to share some of the great work that we did with our partners at Housing and Community Development. My name is Jeffrey Marino. I'm the Director of the Office of Data and Innovation.

ODI was established as part of Governor Newsom's first budget in 2019. We began as an office within the Government Operations Agency and became a standalone Department under GovOps in 2023. ODI is a government to government service.

Our mission is to partner with state departments to support them with the tools, training, design and data practices they need to create more efficient and effective processes.

ODI sets statewide standards for data use and service delivery, partnering with departments to build better services and training the statewide workforce to set them on a path of continuous improvement, collaboration and innovation. We're a small team with a big mission.

We have a broad mandate working on statewide initiatives such as Gen AI Equity Standards, as well as helping to solve Department specific challenges such as with the Homestead Project.

Through this project, ODI used advanced analytics tools and techniques to help HCD process, analyze and visualize their data more efficiently so that their subject matter experts could spend less time on manual processes and more time working with local jurisdictions to help achieve the state's affordable housing goals. Our work with HCD isn't done.

We continue to collaborate to refine additional features of the tool and further improve the annual progress report process together. And with that I'm happy to turn it back over to Megan.

Thank you. So as you heard about Office of Data and Innovation is able to help departments like mine when we have we have projects where some innovation, some connection to that data world would be really helpful. So I was able to spout off a bunch of numbers to you earlier. The reason I can do that is because of the annual progress reports. It's a real, real wonky thing.

But all 540 cities and counties, not only do they have to do a housing plan every eight years, but they report on the progress of that housing plan every year through these housing element annual progress reports that you over time that that has evolved and to give us a lot more insight into the housing policy activity that's coming through the state.

So the data shows permits, entitlements, constructed homes, as well as income data and numerous other details about which legislative tools were used. Was density bonus involved? Is this subsidized through various state funding programs? All of that data is transparent on our website for everyone to see at any time. It's available through the APR dashboard.

And then for the academic community, we make raw data available, hoping that they'll come in and help help us slice and dice it different ways. And you know, as you can imagine, that's self reported data, right?

That's 540 jurisdictions who on top, to the subchair's point, on top of their day job, which is difficult, they're also having to gather and send us all this data, right? So we're always trying to look for ways to make it easier to report the data.

But also because this data is so important to informing policy, we really care about the accuracy of this data. If it's actually going to tell us informative things that change the way we do policy or let us know if policies are working, we want to be sure that it's correct.

What the Office of Data and Innovation helped us do here was find a way to analyze that very, very large data set in a way that would help catch anomalies or outliers. AB 2657 gave us the authority to turn back any annual progress report if there were data quality issues.

So not just did you turn it in or not, but you know, are all the fields filled out like is the information correct? It also gave us the ability to just follow up with jurisdictions and say, hey, like is this really what you meant to submit?

But to go through all that data in order to determine its accuracy, you would have to use a sampling audit approach. Or you could spend thousands of persons hours trying to look into things.

What ODI was able to do was build us some code, build us a tool that could run through that data and say, hey, here are some where that we think bear looking into, right? It's not enough.

It won't, you know, it's not a tool that's going to say this one is wrong, but it's going to say it's going to allow us to target and kind of catch potential errors, right? So you might, you might have, we're all human beings. Sometimes you write 1000 when you meant 100, right? Like that's going to happen in a self reported data set.

And this is going to help us pull out some of those examples and be able to say, okay, here's a set that are worth doing some further conversations about, some looking behind the curtain or having a conversation with the jurisdiction to make sure that was the intended submission result.

And so that's not something we would have been able to do without a tool like this. We would have had to come up with other strategies. And so we'll get to use this tool for the first time with this year's submission. So just like taxes, they're due every April, reporting on the prior year's activities. So all the data that I talked about today was from the 2023 calendar year that was submitted April 2024.

And so this year we'll be receiving the 2024 activities in April 2025 and be able to, you know, to use this tool to see if it can help show us how to sort of target where to look behind the scenes a little bit more. So that's the gist of the opportunity that we came together on here. And I'm happy to answer any questions.

I'll say first, I'm very happy to see these kinds of projects and this one in particular, and the partnership between the two agencies and the use of data and technology and analytics to improve both our ability to process stuff quickly, identify problems and opportunities, and to unleash the talent within the Department to do more and to do stuff that requires human beings in order to accomplish it.

So do you anticipate seeing, I mean, I know we're still early stages as you've described, but do you anticipate, you know, additional projects after this? In this kind of a partnership, what are we learning about HCDs and the office's ability to. Or potential for further collaborations?

Yeah, I think we can share that response a little bit. I'll say. You know, we certainly, we're really happy we're going to get to use this for the first time. And I think I should have said this earlier, but, you know, I think it's not just about catching.

It won't just help us catch potential errors, but it also might help us spotlight some things that had valid big increases. Right. That are worth us looking into. So anomalies can be good too. Right. Like, what did you do that was the policy you increased threefold.

What's the policy thing you're doing so that we can help tell other people to do that policy thing too. So just wanted to not forget that. But certainly we see there as being other use cases. ODI is a. Is a government to government partner, but their support is A. Support capacity is a finite resource.

So, you know, this was Something that we were able to do through their Department data accelerator project. And we'll, you know, we will volunteer for other opportunities that come to pass in the future, but that's going to be resource dependent. So I'll let ODI talk to, I'll let the Director talk to talk more about that.

Sure. Thank you. I think one thing that's worth pointing out is that our approach to all of our work is iterative. And so there the work is always ongoing to a certain extent in terms of its finite approach.

We really want to come in, do discovery on what the problem is with our partner departments, come to a clear understanding and consensus on that, on that problem definition, and then work through a series of kind of prototyping and proof of concept exercises in order to test whether or not we're taking the right approach.

So in this case we did so first in a discovery period where we actually sit side by side with subject matter experts at hcd. They're the experts in this policy area. We were the experts on the data and how to use it. And so, you know, after that process we would then build the tool.

And I'm happy to talk more about what that looks like and what that means, if that's of interest. But then we need to hand off at a certain point. ODI is a small organization and so we like to say that really a big part of our mission is to build the capacity, not be the capacity.

And so that has to do with. We start that from the very beginning when we're sitting side by side and doing this onboarding and discovery process.

And so that's a long answer to your question, which is to say, because we're embedded in that way, we do get to a major milestone where we can hand off, but the relationship continues and there's always opportunity to continuously improve.

So right now, in the work that we're doing, while we were able to hand off the sort of code base that we were able to put together in order to run these jobs on the data, there's still a matter of where does it live and how can we use it most appropriately.

It's going into production now and so naturally there will arise new problems and new challenges out of that and we're going to continue to collaborate to continuously improve. Terrific.

And I'm looking forward to talking about this more when we do govops as well, because I'm very interested in this approach. Is ODI also involved in the, Is it the excess properties? Is that what we're calling it? But not. Okay, what Can I ask you about this?

And you kind of prompted him when you said sometimes we put a zero, we say 1000 when we mean 100. So this is the excess properties database. So this comes from the 2019 Executive order from the Governor or 2018. Sorry.

So, and I'm just going to fully admit that that sounds right, but I, I didn't, I didn't know I was going to talk about this. That sounds right.

Well, you just, it was, you just released it. Right.

So that's, so the kickoff was that Executive order. Right. And then there have been subsequent, subsequent revisions under law. And then this latest decision is actually just a, just an administrative innovation.

So you have the Executive order, then you have, I'm not going to remember the Bill number, but then you have a Bill number that asks us to really map all, to redo the inventory.

And so just to talk about that for a second, redoing the inventory, this round of that, we did not just look at the state's excess property. So that's excess. When a Department says we don't really need this site anymore, they tell our friends at Department of General Services that, well, we endeavored to go much beyond that.

So we looked at every site the state owns, whether the Department said it was in use, active, had plans, whatever it was. We took every single site in the state's portfolio and we ran it through another data tool, but not from our ODI friends, but to look at, is this site good from a development perspective, right?

Like is that, is this land actually developable or is it a weird slope or a weird tiny parcel that, that isn't going to be used? And then how does it compare to the state's affordable housing criteria?

So is it in, is it near transit, Is it near jobs, Is it near, in a higher resource area, is it going to be near amenities and services promote walkability and good climate outcomes.

So we ran through that screen and even if it had not been identified as excess, that kicked up a conversation between, if it was a good site, then we had a, we had a very friendly conversation with the Department about whether it might be, it might be more useful in our portfolio. Right.

And so that brings us to what was released just now. And I'm going to say it's 24 additional sites we were able to add to the portfolio through that, that rigorous process.

But more than that, the big announcement that came out on this is that instead of our approach previously, which had been doing a request for proposal, like us saying, okay, let's pick this site and put it out as a request for proposals.

We're going to do a 99 year lease for a dollar and see who's willing to come develop that site for affordable housing. That's us putting skin in the game, right? That's us saying we're going to cover this piece of the affordable housing development process.

We're going to give the land for effectively free to make this development easier to happen. But we were doing that one by one. What we changed this week is every single one of those sites is now available for developer interest simultaneously.

So that's going to give us a chance, a race to the top among the development community to see who really wants these parcels, who's willing to, to do it in a good cost scenario, being willing to bring affordability to the table, et cetera.

And that'll give us a way to prioritize which sites to focus on and also create more transparency into the process as well. So we're really proud of that shift in the program.

It's been really a favorite part of mine from this Administration was kicking it off with that EO because I like showing that we are bringing a piece of the puzzle to the table. And you know, it isn't all new money. It's also showing that there's other ways that we can contribute.

Great. I'm looking forward to learning more and probing more into it. I think the, you mentioned that one of the, one of the key criteria that we look at in our housing projects is is it near X, Y and Z?

X, Y and Z being is it, is it near transit, is it near services, is there childcare nearby? And those are, that's a recognition that a successful affordable housing development requires those things both for its residents and for ultimately for community support as well.

But we, but we kind of stop our asset assessment at the housing project itself. And so, you know, there are parcels in Vallejo that themselves are not developable for an affordable housing project, but they would be a fine, you know, neighborhood park or childcare center or laundromat.

You know, those things that we say you should be near or transit stop, they should be near. But there's no, there's, we don't have the ability to capture those excess sites for the things that make the affordable housing development project sing.

So I think that's, I think I. Really appreciate that comment and I'll say, you know this, we'd love the opportunity to talk to you more about some of what we have done so far and with some of the larger campus, campus site. So you know, places where you've taken fairgrounds, right?

Some, some parcels are, are, some parcels are small, some parcels are big campuses. Right? Well, we're not going to use that whole campus for one specific use. We're going to, we're talking about, you know, schools, we're talking about what other amenities are coming to the table there.

And so I think there are examples we can show where we are thinking more about that holistic community support. And then I would say, you know, it's the Sacramento region has, I think, been really ahead of the curve here.

But the regional early action Planning grants of 2021, the so called REAP 2.0 program, I really appreciate as really kind of trying to bring that more holistic thinking to this too of hey, it's housing, but it's also, it's also these other pieces of the puzzle and how do we get the infrastructure right, how do we get the planning right, how do we support the economic development side of things so that we can also create more parcels that are sort of affordable housing ready?

And so, you know, we hope, we hope we can always, we're always happy to talk more about the stuff we're really proud of. So, you know, just, just let us know.

That's exciting. And you know, in other parts of the world, governments are doing that and really thinking about how to use this excess land to spur innovation but also solve multiple needs at once. And it made me think about the point that you raised, Mr.

Chair earlier with those 24 access parcels that have been identified as access given, we aren't investing in affordable housing development as we have in past years, that opportunity then also would come to some level of barrier or halt because we don't have the funds to actually move in this area to take advantage of this new information that we have in this sort of simultaneous role.

So I just want to say, as exciting as it is to, to hear what you shared, but also the data that's telling us all of this generative information without the resources, it seems that we kind of fall back into our sort of challenge that we've been trying to dig our way out of over the past years.

I don't know if you care to comment about that.

Probably more of what I shared earlier, but it's a big challenge. And so we want every, we want every tool in our, in our disposal working toward that challenge. But I would say, you know, we see, we see the high demand on the tax credit program that Director Wyatt was talking about today.

We see the, the more than $1.0 billion in our home Key plus portfolio. We see the $1.0 billion in our HAPP portfolio as contributing to that permanent housing solution as well as those other sources, the PLHA and others. And so, you know, I think we, we still see a lot of finance financing opportunities on our table.

And so some of this is about staging things in the right order and getting things set up because, you know, there is only. It's also important to, to make sure that we're continuing to, to drive innovation and cost reduction too.

So we want to make sure that we're also trying to stretch the dollars that we bring to the table as far as we can. So, you know, but heard, yes, like the money is always going to be part of the solution too. But we do see that we have some resources at our disposal there to work through.

All right, Finance or LAO, any comments on this item? All right then, thank you very much. We'll proceed then to item nine, which is accessing equity for affordable housing projects. Welcome back. Please proceed.

Good morning again. So the purpose of the proposed trailer Bill Language would allow housing development sponsors to access equity in existing Department funded projects for the use of preservation, rehabilitation, or the development of new forces affordable housing projects. The amount of funding for the proposal will generate will be based on the interest of individual sponsors.

But we do know that there are quite a few projects within HCD's current portfolio that could be eligible and immediately interested in the program. And it could unlock as much as tens of millions of dollars into what would be a revolving resource to support new development for preservation activities.

So in essence, we're basically doubling down on the original investment that we put into these projects. HCD really believes that this is one of the most significant budget neutral actions we can take in a time of limited resources to close an enormous gap in affordable housing. Happy to answer any questions you may have.

So tens of millions is the estimate that you have year over year, right?

Yeah.

Okay. And the community of affordable housing developers have been. Have they been involved in the the language

Absolutely, the proposed language was actually crafted and negotiated with affordable housing developers and sponsors. And any guidelines that HCD would put out to implement the program would of course be subject to public participation and stakeholder outreach.

So the trailer Bill Language is pretty extraordinarily broad in authorizing the equity be redeployed for any other purposes approved by the Department. Is there a reason why you're seeking such unbounded authority with respect to the reinvestment provisions?

So we want to be as flexible as possible, but then also through the development of guidelines or regulations on this. That's where we would put kind of the barriers and controls around it. Of course, we would ensure that, you know, any equity that's taken out of a project would be done in a fiscally responsible manner. Right.

We don't want to put any properties at risk. Right. We have a long term investment, 55 years. We want to see these properties be able to, you know, continue for the life of that restriction period.

So this gives us, first off, it requires us to implement a program that gives us the maximum flexibility to develop exactly what those parameters would be and how we would evaluate projects through a guideline or regulation process.

But I mean, we could do that in the trailer Bill. Right. You have a set of, I think, five provisions right now, which are. They're not. They're themselves broad and they advance the goals that you described in terms of will this produce, increase or improve the supply and then a variety of other elements.

I mean, do you anticipate learning more about what the criteria should be through the regulatory process, then we would be able to ascertain in the next couple of months before the budget is adopted?

I think so. Once we get the involvement of additional stakeholders to see kind of what their interests are and what their needs are, we'll have a better sense of exactly how to craft the program. But right now we need the statutory authority to actually implement any type of excess equity or cash out.

Yeah, I'm very interested in the program, but I do think we should be, you know, we should be inviting the Department and finance to be, to be providing a more concrete boundary about what the, what the, what the potential uses are. I think this is, it's a new initiative. I'm excited about it.

I like what you've described in terms of its purposes and its mechanics, but it seems early to. And the five criteria that are here seem to cover the field. So it seems, it seems early to be providing sort of unbounded authorization to determine any possible uses at all. But look forward to the continuing conversations about it.

So thank you. Other comments from finance or LAO on this. Okay. All right, next up is item 10, which is consolidated default Reserve Fund creation.

Perfect. Thank you again, Matt Schueller with HCD. Currently, statute authorizes HCD to set aside a portion of funds appropriated for rental housing concern construction as a default Reserve.

The purpose of the default Reserve funds is to serve as a resource to cure or avert projects from defaulting over the 55 year regulatory period, which would lead to a loss of affordable housing Supply. Currently, these default Reserve funds are allocated across multiple accounts, resulting in increased administrative workload and complexity in management.

And additionally, HCD requires active ongoing appropriations within each respective Fund to effectively administer these default reserves. The trailer Bill Language proposes to consolidate these default Reserve funds into a centralized account. HCD can enhance transparency and streamline operations, reducing administrative burdens and improving overall efficiency in Fund management. And the approach will ensure more effective resource utilization. And with that background, happy to answer any questions.

Thank you. So the differences between the programs in there, the ones that need to borrow and those that have assets to be able to land essentially under the current structure, are there reasons why some of the programs are in one side of that ledger or another on a consistent basis?

Are they not on a consistent basis just every year? It could be any program that's in looking to shore up its default reserves and any program could have excess or what's the landscape? Look at these programs now under the transfer authority that you already have.

So what the default reserves look like is there's a certain percentage for each of the rental construction projects that's set aside in statute and the funds exist in Reserve until such time that we really do need to cure or avert a deeper default. Right. So that's their sole purpose.

So luckily we, you know, don't have to rely on those funds very often, but they do need to be preserved over that 55 year period. So what the analysis has shown is that projects are more, projects are more likely to default later into their life.

So these funds are held in Reserve separately from most of the programs that you saw today incorporate some portion of default Reserve in the ongoing. In the ongoing appropriation.

Yeah, understood. I guess what I'm trying to get at is, I mean, is it just, you know, in any particular year where there's a transfer happening between the different programs and they're in their, in their independent or their separate Reserve funds.

Are there, are there trends or you know, is the housing for veterans Fund like always the one that's borrowing money from the no place like home Reserve Fund or is it just random or it's just who has projects that year? Are there any, are there dimensions of the programs themselves that are consistent across over time?

So it sounds like maybe you're asking to what extent are. And are we using default reserves from one program maybe more rapidly than other programs?

So we haven't actually tapped into the default Reserve very much at all. And that speaks to a lot of hard work people at HCD to prevent default. Right. The concern is, you saw, we've got $14 billion in the last six years. We've got 3.3 billion coming in. The size of our portfolio is growing. Right.

But the size of the default Reserve is not necessarily keeping pace.

And I think, too, in answer to your question, depending on the size of the project that might default, there could be the need to use money from other programs in order to be able to support that. And we do have the statutory authority to be able to do that.

That was part of the effort in 2018 to kind of consolidate for use. This would be the other piece of it is to consolidate administratively. So we just had one Fund instead of having to manage it across the multiple funds like on the slide you saw in the presentation earlier today. Okay, what?

In essence, it's an administrative efficiency, but they're not.

They're. They're. There aren't transfers that are happening today much between them? No.

For the use and projects? No.

Okay, gotcha. Okay, thank you, Finance or L. Any comments? All right, then we'll hold that open, then move on to item 11, which is the alignment of expenditure deadlines.

Correct.

So this proposal is, again, largely administrative in nature. It moves the expenditure obligation and liquidation deadlines for several of our programs in order to align those deadlines with federal deadlines for both our home Key program and three federal grants.

I think I've asked the Mr. Petek at LAO this privately as well. But so do, are you, are you, are you supremely confident that none of these federal dollars will be swept in the, in any of the federal budget actions that are anticipated in the coming months? for, for these, for these, for these sources

Particularly related To the home key funds. Those funds are already in the state coffers and have been awarded for the most part or are actively in NOFA and making awards.

And with, you know, with respect to prior appropriations, we continue to monitor the situation. Right. Both at the federal policy and, you know, legislative level. But at this time we wouldn't want to speculate with respect to what might happen.

Well, I mean, but I mean, we are speculating here. We, I mean, here we're saying, look, the, the Federal Government has extended deadlines, correct. And, and so we can extend ours because we're confident that we will get, we are very confident we will get that money when.

But there's obviously quite a bit of uncertainty, so some level of, I mean, there's implicit speculation that, that they're not at risk. And so I understand if we have possession of, you know, where we have physical possession of the cash, obviously that's not as a cause for concern. Okay, LAO, Finance, thank you. Next up is implementation of recently enacted legislation.

This request covers legislation that was enacted in the last session. Let me find my notes here. And the proposal includes eight bills that HCD will need resources in order to implement.

And these bills include, but are not limited to a new tribal housing program, reporting requirements for voucher success rates, an HCD report on transitioning seasonal migrant housing to year round housing, and an HCD report on the installation of rainwater catchment systems for non potable uses in newly constructed residential dwellings.

We are requesting 7 million in General Fund in 2025 and 26 and 1.6 million ongoing, 578,000 in special funds in 25-26 and 189,000 ongoing and nine positions in 2526 and ongoing for these resources to implement the statutory requirements. And with that, I'll take any question.

Okay, thank you. So I did have a couple questions on, particularly on at least one of the bills, Navy 653 on the status of implementation of 653 which established the requirements for utilization of the federal rental housing vouchers.

Just to check in where we're at in terms of the implementation here, what HCDs plan for educating the public housing authorities might be for the Requirements to report data.

So with respect to the individual, individual bills, I would request a little bit of assistance from my colleagues.

I'm so sorry, what was the question? The PHA one. . What was the question?

Yeah. So how is hed implemented? Planning to. Or are you already educating the housing authorities about the requirement to report data and through what kind of a data system are you anticipating those reports happening?

So we there, there have been several conversations with the PHAs since the, since the Bill became law. As with most bills, we are asking for resources, so we aren't able to fully begin implementation yet.

We would presume to use these positions to help with building out the data infrastructure to collect that information, as well as technical assistance to the PHAs. But we'd build off of prior systems. Right. So we'd use things like we use for the annual progress report system. But obviously this is a different stakeholder group.

It's not the cities and counties, it's the PHAs. So where it'll have to be, we can't just build it into the existing system because it's a different group. But that's the gist of it. And I'm happy to if you have specific questions, let me know and we can talk more about plans.

Okay. All right. And so you're intending to look at data sources that you already have and at minimizing the amount of additional reporting that the PHAs have to do.

Yeah, so that we'd copy prior infrastructure, but we'd be building a new system and then the TA would have to be specific to this Bill and we'll be doing outreach as well to the PHAs on what their data systems are so that we can build a system that's gonna be better and easier at collecting their data.

But that's kind of how we do things with the annual progress reports as well. And usually what we find is everybody uses a slightly different system. Everyone is in a little bit of a different capacity situation.

So, you know, I imagine as in that space, we're going to learn a lot as we begin that stakeholder outreach and really begin to understand, like how are these things tracked on their level and how can we ask for it in the it won't be painless, but, you know, in a less painful manner.

All right, thank you. All right. Comments from Finance or LAO. Okay, I know our agenda suggests we're going to, we're going to take action on this day. We're going to ask that we hold it open for when our for a hearing coming up soon. I'm talking about in May.

Obviously it's important that the Department is aware that we're fully committed to funding an effective implementation of the programs. But I know we had a couple more questions. All right. That then brings us to public comment on the HCD budget proposal.

So thank our, thank our guest from the Department and invite anyone and Members of the public that wishes to provide comment to the Subcommitee on the Housing and Community Development budget to please step forward to the microphone at the front. All right, that's seeing none.

We're going to hold those items open and move on to the California Housing Finance Agency. All right, welcome. And you've heard us ask about the LA Fire as well. So it's sort of the same question if you can incorporate that in your opening remarks. But welcome and thanks for joining us.

Great. Good afternoon, Chair. Thank you for inviting me to speak here today. My name is Mehgie Tabar. I'm the Director of Legislation at the California Housing Finance Agency, or CALHFA. CALHFA was established in 1975 to provide an innovative and effective financing program to address California's housing needs.

CALHFA has a Board of Directors and while we often administer state and or federal funds, our operating costs are completely self supported through our lending activities. So that actually sets us apart from our sister agencies, HCD and tcac.

I mentioned this unique governance structure because when you combine that with our strong credit rating, it gives us what I call our superpower, which is the flexibility and access to private capital necessary to fulfill our mission and to help the state address a variety of specific housing priorities.

Our programs are designed to complement the work done by our sister agencies in addressing the state's continuum of housing needs from homelessness to home ownership.

On the homeownership side, CALHFA serves Low and moderate income first time homebuyers with down payment assistance and access to first mortgages through our statewide network of private partners, private lending partners, last fiscal year we were able to help over 6,000 California families achieve the dream of homeownership.

Our flagship home ownership program, My Home, provides up to 3.5% of the purchase price as a down payment or closing cost assistance. This was also supported for the past two years by our award winning Dream for All Shared Appreciation Loan program which I will provide a further detailed update on in a moment.

On our multifamily side, we provide financing to developers who are creating and preserving affordable housing primarily through our Mixed Income Program or MIP. Overall, California's affordable housing finance helped produce nearly 4,000 units just in the last fiscal year.

Most of those units are between 30 and 80% of area median income and developers who use our mixed income program have access to bonds, historically tax credits through TCAC and a subsidy loan for new construction developments.

Over the past few years, CALHFA has also offered ADU financing and administered the state's mortgage relief program using federal American Rescue Plan funds. You mentioned the impact of the LA wildfires, so I wanted to talk about CalHFA's efforts there. We've been coordinating wildfire relief efforts with the Administration, including emergency responses as well as longer term actions.

CALHFA recently completed its review of properties in our single family lending portfolio that have been impacted by the LA wildfires. There are a total of 140 impacted properties with a CALHFA loan. 52 are already in a forbearance plan and 11 in other mitigation plans.

In our multifamily portfolio we only have one property that suffered damage and it's already getting repaired through insurance. We don't have data on the ADU grant program yet because folks cannot get access to those properties to inspect. We have had at least one home or one borrower reach out to us because their in progress ADU was damaged.

They intend to finish that and no action is necessary because there is no expiration date on the grant funds for our ADU program. CALHFA is continuing to monitor the impact and explore additional ways that we can help.

CALHFA also has an existing disaster recovery loan program for victims of any disasters, so this would make LA fire victims Eligible borrowers can get access to 100% financing through FHA Insurance Mortgage program with our My Home down payment and closing cost assistance and they do not have to be a first time home buyer.

I can also talk about the national mortgage settlement that was announced recently, but that's the next item. If you'd like me just to proceed.

Thank you. Are there questions for Members of the Subcommitee? Senator, just want so do you, given what's happening with HUD, do you anticipate any disruptions to HFA programming or other operational challenges as a result?

Yeah. So CALHFA, as I mentioned, we're set apart from our sister agencies because we are self funded for our operating costs and so unlike our sister agencies, we are not as reliant on state and federal funds.

With that being said, as many of the speakers you heard from HCD on the multifamily side, those projects require a wide array of funding sources to make it pencil and so on the multifamily side, our MIP program, those units are reliant on tax credits and other sources of funding.

So while we might not be directly impacted at calhfa, we can see the impact potentially on the outcome of units that will be developed in the long run. Otherwise, you know, we're continuing to monitor it changes every day. On the lending side, we are very interested to see what happens in terms of FHA regulations. So we're keeping an eye on that as well.

Okay. And then because of your, your financial and organizational structure, did you have you had to deal with the vacant positions and other budget orders to reduce operating costs?

We have reduced some of those things. So we work with the Administration very closely because we have our. Because we were self supported in operating cost, we didn't necessarily need to do that, but we proactively reduced, I believe our hiring by 8% or 9%.

And I would have to look at some other numbers, but you know, I think we recognize that all the agencies really had to come together and think about what was going to be most important as we looked at the budget deficit last year.

All right, Finance LAO. Okay, thank you. Then let's move on then to the settlement. The National Mortgage Settlement Funds relief.

Great. So last week Governor Newsom proposed and the CALHFA board approved up to 138 million for a new mortgage relief program for homeowners who are at risk of foreclosure and whose property was destroyed or substantially damaged because of declared emergencies since January 1, 2023.

So this includes those affected by the park fire, Franklin fire and the recent LA fires. The new program proposal includes a minimum of 100 million for direct mortgage relief and 25 million for CALHFA's existing National Mortgage Settlement housing counseling program. So for those of you who aren't familiar with this program at CalHFA.

I just want to provide quick background. The state allocated CalHFA 300 million from its National Mortgage Settlement funds in 2020 for the purpose of providing HUD certified housing counseling services and to provide mortgage assistance to qualified California households. CALHFA is really proud to share the success of this program.

We've served nearly 80,000 households in California and continue to do so. Our existing housing counseling program disperses funds incrementally to these HUD certified housing counselors for services for those experiencing homelessness, rental housing services, mortgage delinquency, reverse mortgages and home buying counseling, both pre and post purchase.

The nature of this program, both capacity building and individual counseling session, expends funds gradually. Therefore, to date, not all Funds have been expended. The newly expanded mortgage relief program is aimed at low and moderate income homeowners on their primary residence only. We are exploring up to three to six months of mortgage payment assistance to qualified homeowners.

Additional program details are forthcoming because we are actively figuring that out with an expected release of the program in spring of this year.

All right, questions for Members of the Committee?

Thank you so much for that. Thank you, Mr. Chair. So thank you for that update on this important program. What is the anticipated timeline for receiving assistance?

You know, if someone applies for these resources today, how long does it take for them to be able to have counselors contact them and actually receive the resources that they would need?

So college of a role here is to support the HUD certified housing counselors so that all like we're, that would happen through that third party. So I, I don't have that direct information in front of me, but we would be happy to follow up with you.

My, my understanding is that when they apply, they get access to the HUD certified counselor and from there the HUD certified counselor makes a certain amount of, of time available to, to each applicant.

Okay. Yeah. I'm just curious about that time and in particularly thinking about these, you know, fire victims and, you know, what is that length of time if folks are needing assistance, but also if they're denied assistance, what does that process look like and are there alternative options that you all are helping to put together?

I'll just say that. So up until this point, our National Mortgage settlement and Mortgage Relief program, anyone in California that was eligible could apply. So as we're thinking about this new program for victims of fire, I think that sense of urgency will be there in a different way than it had been.

This was just announced, you know, in the past week or two. And so calhfa, working with the Administration, is really trying to lock down on some of those program details. But I think we're very aware of the sensitivity.

I don't, you know, in terms of denials and appeals that will all be spelled out in the program guidelines once, you know, finalized.

So I was just curious if those have been finalized, but I would love to see.

Yes, they are actively being worked on.

I would love to see what the sort of culmination of all of that work.

We'd be happy to follow up once finalized.

And then the qualifications. Can you say more about what makes you qualified for the program?

Absolutely. Overall, the program on its surface is for Low to moderate income homeowners. The new program specifically is geared towards homeowners on their primary residence only. And so I think there were some questions about, you know, whether or not folks whose businesses were impacted would be eligible. But this is very specific towards your primary residence mortgage relief.

Thank you.

Thanks for the work on this. I have some questions about how I'm not quite putting together the process here. So these are funds from the settlement and the Legislature and the Governor appropriated $300 million in the 2020 Budget act for the two purposes that you described.

Correct, 300 million. And we've been expending that since.

But so my question, and I've taken note, and you've mentioned it too, that the Governor announced that this is going to happen and the board's approved it. What's the appropriation authority to do that?

That's great question. I don't know that I have the exact answer in terms of the appropriation authority, but my understanding is that CALHFA has already has the authority for these eligible uses. And so as long as the board approved it and it is within the eligible uses that it should, we should still have authority over it.

But I would need to follow up specifically, specifically about that finance.

Teresa Calvert with Department of Finance it appears that the authority was provided in 2020, so it's still working from that original allocation.

I don't know the mechanics of its not budget act at this point and I don't know what the original appropriation, whether it was statutory or budget act with like a multi year funding availability because these are settlement funds. Sometimes those do take a different track with regard to appropriations. We can follow up on the specific language at the time to see why the appropriation is still active and in a multi year status.

Okay. Yeah, I think I'm interested in that dimension, but more in the and I haven't looked at the budget act or the statute or any of it, the control language. But if it was appropriated for these two purposes and maybe it had the language HCD loved about or anything else HCD might want to do.

But if it's appropriated for those two purposes, even if the appropriation still active, what's the under. Under what? You know, under what provision allows Cal the the board of CALHFA to, to change essentially the, the, the intended, the approved purposes. Okay, any other questions? Lao, any comments on this?

Okay, next up then is that one's for information only. Next up is the reporting on the California Dream for all to.

So for those of you who are not familiar familiar with the California Dream for All program, it's a revolving shared Appreciation loan program that provides loans for a down payment to qualified home buyers.

So upon sale or transfer of the home, the home buyer repays the original down payment loan plus a share of the appreciation in the value of the home.

So for example, if the program provides a loan for 20% of the home purchase price and the homeowner pays back the amount borrowed plus 20% of any appreciation in the value of the home, accounting for the total funding allocation fallout from phase one of the program, interest, earnings and administrative costs.

We had approximately 260 million funds to award. In phase two, funding was distributed based on the percentage of households in each region. The ultimate number of vouchers that we will end up awarding will depend on the average loan amount in each region.

So if the loan amounts are lower than the projected amounts, less than what we Projected at the 150,000 average, there's the potential for issuing more vouchers than we originally planned for.

Before I get into the numbers, I just want to highlight a few key changes following the dramatic over subscription that we saw when we rolled out phase one.

First and most importantly, we replaced our first come first serve reservation system with a pre registration portal where prospective borrowers could register for the opportunity to take out a DFA loan. We then used a randomized selection process to select borrowers that receive a program voucher.

With that voucher, home buyers have 90 days to look for a home and Reserve their DDFA loan with 190 day extension. That lottery system allowed us to put in place geographic set asides which ensured that we could distribute the funding equitably through the state. These two changes were important to ensure that we reached underrepresented communities.

The goal of the lottery system was to give folks time to come in off the sidelines. And the geographic set asides made sure that we could Reserve funding for diverse areas like Los Angeles. Although key was also sorry, although that was a key component.

I think the really exciting part of this is that we introduced a first generation eligibility requirement which was the first in the nation at this scale. The basic intent of is to Reserve assistance for people who haven't benefited from inter generational wealth associated with homeownership.

So for phase two, College FA received over 18,000 eligible applicants for only 2000 vouchers. In June of last year we awarded 1700 vouchers per that randomized selection process that I mentioned. And we also placed an additional 4,500 potential borrowers on wait list for each region.

So if you were awarded that voucher, you had 90 days to find a home with 190 day extension after the loan reservation. Applicants then had up to 180 days to close to to close the loan. We're issuing new vouchers on an ongoing basis.

As vouchers expire or as loans come in below, the maximum or more funding is available. Currently we have 2,300 active vouchers with over 70% of those vouchers held by BIPOC borrowers. The final round of voucher issuance is tentatively planned for next month.

We're continuing to track and monitor outcomes with careful consideration of LA County status and outcomes due to the recent wildfires.

Questions? So how did the actual population of Phase two compare to Phase one given the changes that you made? The population of folks who received the funds?

Yeah, so not everyone who is. It's a little complex in how we talk about it because not everyone who has been issued a voucher use their voucher. That's the reality of our housing market.

We don't have a final loan amount or loan count to compare phase one to phase two right now since we're actively still, still issuing those vouchers and we don't. Yeah, there's still active vouchers out there and so we need to wait until all those have been expended to have that final loan count.

But from our preliminary review, Phase two has maintained a very strong performance in California's Latino and AAIP communities. And we substantially improved the share of voucher recipients who are black or African American, which improved significantly. After a really large trust building campaign.

We had a very large marketing budget and so CALHFA really put the time and energy to make sure that trust was built and folks had the right information to participate and engage. So yeah, more to come as those final loan counts come through and loans are securitized. And we will absolutely follow up with you once we have some more to report out.

Do you have data on the sort of share of underrepresented populations and home ownership that are participating in this program? More specifically? I know you name groups, but just curious.

Yeah, so for phase one, it looks a little bit different for Phase one and Phase two. And so we do have data available for phase one and I'll just need to follow up with you and your office and provide that.

When you. So you were describing the first gen policy. Is that a eligibility change or a ranking or lottery points change?

Eligibility.

It is eligibility. So. So have you did the, did the marketing and the program materials change as well? And I'll tell you why I ask, you know in our, at least in my district office and we get a lot of inquiries about a program that's called California Dream for All. Yes.

And you go on the Internet and it's all of that branding and description hasn't changed. And so folks have said, they told me I was just not eligible at all. That can't be right because it's, it's a dream for all. But so you're, so you're saying they're categorically ineligible.

Now if so for phase one, that was not the case. But for phase two, yes, that was an eligibility requirement and, but is it a first time homebuyer and first generation?

Didn't we. And we did we. Did we recognize this? I mean given the number, the amount of over subscription that we had in phase one. So people were aware of the program. Lots and lots of Californians aware of the program. Then phase two opens up.

Did our marketing and informational materials make clear that this was in some sense a fundamentally different program in terms of who's eligible? Or were a lot of folks feeling like this is a program that's for all that I applied for and now the rules have changed without them knowing?

Yeah, that's a really good question. I'm not sure if the marketing materials specified that. I do know that CALHFA had not administered a program with this much interest and popularity before. And so that first phase really took us by surprise at how much interest there was because Dream4All doesn't have any more money, but my home does.

And we don't have that same interest for, for my home. And so I think that after phase one we took a step back and had to think about ways that we could communicate and market to everyone but as well as those who are disproportionately impacted by the inability to become a homeowner.

And so I don't know for sure if that marketing material specified it, but I think it was really a policy decision that we wanted to focus on.

Yeah, I don't disagree with the policy at all. I think, you know, the first gen policy focus is the right one.

I think the, the, the challenge, this is the mayor in me speaking is that like regular human beings that, you know, we have to pay attention to their, to their own perceptions and psychology around programs like this.

And so even if we then focus our marketing on first gen potential first gen applicants, then it, it creates a, it erodes public support for and trust in government and the work that we're doing. We don't attend to the way that we Frame these, you know, we have been, we launched all these like, first in the world programs and they're for everybody.

And then when you get into it, like, it's okay, it's everybody, but everybody that I, you know, that me or everybody that I know and people I, I find, at least my district, Californians are very, they, they agree with our attempts to try to prioritize programs like this, but we should just be clear about it and make it clear that we're not leading people, you know, into, into a whole process and getting, and creating hopes that we, that we have no intention of meeting by policy.

So it's not a disagreement in any way with the policy, but we need also attend to how the policy lands in the, in the real world with the, with the people that we're, that we're serving. So thank you.

Noted yet.

Finance LAO. All right, so that item was also for information. So that brings us then to our vote. Only items.

All right, we'll hold item 12 open for some additional questions, but with intention of taking that item up relatively quickly in an upcoming hearing. And so now we will move to the, the votes on our vote only items. And so we'll start with items 242 and 4.

So is there a motion on items 2 and 4? All right. It's been moved by Senator Smallwood-Cuevas. Mr. Griffiths, would you please call the roll?

[Roll Call]

All right, so that'll be the order then. That now we're holding it open for now, I think. Yeah, we'll hold it open for now because we will. We're now going to move to any final public comment, any residual public comments for the, for the Subcommitee.

Welcome. Good afternoon. Mark Stivers with the California Housing Partnership, also speaking today on behalf of the California Housing Consortium. First, I just want to say thank you to the Committee.

I think putting housing first of all, the hearings you could have had, I think signals to us how important it is to you all that this is an area for review and investment. And so that is noted and appreciated.

Secondly, on behalf of a broad coalition of affordable housing, homelessness and housing justice organizations, we have tried to come together with one particular ask. And of the many housing needs out there, we have prioritized five programs that we think deserve investment. We talked already about the state low income housing tax credits.

We are hoping to see 1 billion in that this year. Again, that is the quickest, most Efficient way to get that pipeline under construction. We also like to see 400 million for HC's multifamily housing program.