Assembly Select Committee on Housing Finance and Affordability

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Good afternoon everyone. The Assembly Select Committee on Housing Finance and Affordability will come to order. The Assembly Select Committee on Housing Finance and Affordability will come to order this afternoon. I would like to welcome the Committee's first hearing of 2025. I'm excited to begin alongside my colleague and co chair, Assemblymember Harris Binion.

Today's hearing is focused on housing and financing it in California. We will hear from several panelists involved in housing finance, from state agencies to developers themselves. Our goal here on the Committee hearing is education and finding a pathway to solving a very complex space of financing housing opportunities from mixed housing developments to first time homebuyer programs.

As someone who has spent the last 30 years prior to arriving to the Legislature occupying, occupying affordable housing development, it is such an honor. I feel like I'm at a housing family reunion today to see so many familiar faces of people that I had the honor and pleasure of working with along my housing career and my journey.

So nothing brings great joy to me to be in a space again to gather with such talent alongside with my colleague to be able to facilitate this dialogue in this forum with you all and to hear from you all of what's going on present and what we plan to do for the future today.

Many Californians will never see the keys to their first home. The American dream isn't just delayed. We're priced out. And the cost to buy and rent a home in California from groceries and just the cost of living is exasperating the housing market.

As we have seen, the housing prices of the medium home now has gone up to 884,000 throughout the State of California and various communities Higher. We know that decades of insufficient housing construction has left us with severe undersupply of housing leading to higher prices, prices and higher rates of homelessness.

To keep up with demand, the Department of Housing and Community Development estimates California must plan for development of more than 2.5 million homes over the next eight years. 1.0 million of which must be met with the needs of lower income household.

The Legislature has taken several recent actions to spur housing development including requiring local governments to increase development capacity via regional housing need allocation process and housing element laws. Expending and streamlining local housing approval process at multiple phases, providing additional funding when possible for developments and Affordable housing through the Housing Committee in particular.

Many of you saw several bills that came through with my colleagues. So there is a concentrated effort at all levels at the state Legislature to find solutions to the financing crisis, to the development crisis and the construction crisis. We need to recalibrate, and this Committee is hopeful, the pathway to recalibrating solid policy with solid solutions.

Our goal at the end of this Committee is to be able to collectively bring a think tank, an educational opportunity, a space for the community to also have a voice here and to be able to deliver a concrete recommendation to the Legislature and to our Governor of what we need to do moving forward.

And so I hope this is just the beginning of gathering data to be able to actually put a proposal of action plans together.

I'm grateful to Assembly Member Speaker Rivas for establishing this Committee and making California affordability a big priority for the Legislature and excited that this opportunity for all of us with my colleagues to be here to talk about the various spaces in California.

I would like to now pass it on to my co chair to say a few words and also have his opening remarks.

Thank. Thank you, madam co Chair. It is. Let me just begin by saying it's an honor to serve with you in this capacity and your expertise. You, you were very humble in laying out just how well versed you are in these issues, unlike me. And I do come to this debate with the beginners and a novice mindset.

But it is something that I'm very passionate about and it's something that's very personal to me. A little over a decade ago, you know, my wife and I barely got into our first home.

You know, we used bubble gum, scotch tape and all the money we had in our bank accounts to barely get into a home that was at that time seemed overly priced and too small. And. We are figuring out these mics. Does that work now?

And fast forward 11 years later and I have three kids who I am very worried about their ability to actually to be able to buy a home, live in the neighborhoods that they grew up in. And just from 10-11 years ago, it has gotten significantly harder.

If I didn't buy my first home when I did, there's zero chance I would have been able to do it today. And you can see that just in the ranks in our Legislature, our renters caucus has gotten bigger every year. More and more legislators can barely afford to live in their districts.

And this is something that needs urgent attention. And we want deliverables and we want to be able to deliver for the current crop of Home buyers. And those are working families that are struggling, spending too much on rent and can't get into a home of their own. And it's also the next generation, the generation after that.

And if we don't deliver affordable housing and figure this out very quickly, we're never going to figure it out. And so I think this is an urgent topic and I'm so glad that many of our colleagues have agreed to serve on the Select Committee. We appreciate all of you helping us figure out solutions.

And I know many of you have spent years working on this. But this is really about delivering for our constituents. And if there is one issue that I think all of us hear about more than any other issue, it's housing. It's the availability to find affordable housing across the board.

So this is going to be a very informative Select Committee, a very intent on solving problems. Select Committee. And I couldn't think of a better person to lead us than Assemblymember Avila Farias, who again is someone who knows these issues very well.

And to our panel of experts, we look forward to hearing from you and we look forward to having you help us get to this finish line. So with that, thank you, Madam Co Chair. I look forward to today's hearing.

Thank you so much. And just welcoming other Members that stepped in. Really excited to have you all here participate in this dialogue. On that note, I would like to bring up our first panelist. Very excited to again see so many familiar faces.

We have the California Housing Finance Agency, Christina Moon, along with the California Housing Partnership and the Executive Director of the California Tax Credit Allocation and related with California. So please step up and welcome and thank you all for being here today with us. We're looking forward to hearing your presentations today. Introduce ourselves. Hello.

Hello. Okay. I think. I think I was supposed to be first.

Oh really? Okay. Yes.

So I know that we have a presentation set up. So happy to do that. It was not set up yet. Should I. Sorry. Yes, it is that. We do have it. Read it by that. Okay, let me get my laptop real quick.

Do we not have it electronically? Okay, why don't we just go ahead and get started? My only concern is the. Anybody watching would not be able to see the presentation. Maybe. What? Can we wait just a second because I know a lot of people are probably streaming. That's what I was just saying.

Yeah, as housing people, we always have PowerPoints. You guys don't have. Do any of you. Not half a C. I know my peeps. You know what? It's going to take five minutes for them to project it. Why don't we just start and we'll catch it. I'm going to let you all.

Economic Housing Partnership.

We're really excited to be here.

The partnership is a private non topic that's created in 1988. I'm taking bets to see whether or not. Younger younger. And our mission affordable. We do that a number of ways.

We help create and preserve almost 100,000 affordable homes.

We've trained almost 50,000 staff for affordable housing finance and we help leverage over $35 billion.

Moving on to slide 3.

We do this a number of ways. We have financial technical assistance for affordable housing finance. We also have research and sustainable housing as part of the work we do. We also have a number of data tools that you see on slide 3.

One is the affordable housing app where we map out all the data trig and affordable housing in the state as well as the housing data, development, household.

Level as well as the county level. I do want to do a little bit of context setting talking about housing as a large expense for households. Affordability has been a huge issue for Californians today as well as a priority for the Legislature this session. And household expense of housing is the largest expense.

I've done a lot of work on the Affordable Housing Sustainable Communities program this year as it is funded the Cap and Trade program and we publish an impact report every year. So you can see a graphic that we use on slide number four showing a number of the different co benefits and benefits of the program.

It's a pretty complicated slide though. I want to highlight one number specifically which is the $10,000, $10,566 per year. That's the average amount of savings a household obtains by living in a, in a, in housing situation funded by AHSC. I'm a community college Professor as well. I teach chemistry at the local community colleges in the area.

And $10,000 a year for one of my students who might be a single parent is enough for two years at the community college and two years at a UC or a CSU. That's enough money for them to get their degree and provide a better economic opportunity for them. You can go to the next slide.

Economic opportunity for them, right. And that's why in the next slide you can see that housing isn't just housing. When we fund housing, it's also investing in communities. So next slide, it's investing in communities, right. We're investing in individuals and households.

And if you look at all the co benefits around there, including the local taxes and the jobs created, it's really a community development exercise when we invest in affordable housing. So on the next slide you can see some of the data points you can get on our website.

One being the affordable home shortfall where we have at least 1 million more homes for low income households that we need in California. And we also look at cost burden per per income level here. Looking at as you decrease in household income, you increase in cost burden.

So the next few slides I'm going to talk a little bit about affordable housing finance. Again, this is just to level set the conversation here. I'm not going super in depth. We have a lot of people here that can go way more in depth than I can. But just to let us start the conversation.

So the big picture here is that the rents required to build housing are generally too high to reach all populations. So if you look at market rate housing, the rents are high enough to pay for a large mortgage or attract private equity to pay for upfront costs of capital.

So that means your rents are high enough to be able to fill the entire financing you need to build the development. So financing here is fairly simple. I want to say it's simple, but it's fairly simple in comparison to affordable housing.

If you look at affordable housing, the issue here is that rents are far lower than market rate. So your cash flow is going to be insufficient to support a large mortgage or attract private equity enough to build the development itself. So that's why you need public subsidy to do this.

And there are a few programs below that that you can see, like the federal and state low income housing tax credit, which attracts investors to invest in affordable housing. There are subsidy programs that the state offers like HCD programs, the federal programs, as well as local public sources.

And then you can also think of rental subsidy in the sense of project based vouchers. So on the next slide you kind of see what we call a capital stack where you're trying to build enough funding to reach 100%.

So in the market rate scenario, the rents are high enough where you can get enough conventional debt and investors enough to get to 100% without needing public subsidy. But if you look at the affordable space, you do still have rental income, and so then you still can get a mortgage.

It's just not going to be big enough to fill the entire gap you have there. Then you have your low income housing tax credit, but you still have a gap. And that gap needs to be filled by other sources, and we call these soft sources.

And, and these are where a lot of state sources come together, local sources come together to fill that gap, to get to 100% to build the development. On the next slide you can see how many layers or how many sources are layered together in developments.

On average, from 2018 to 2024, we can see on average it was five sources of funding used to build a development and then four developments used twelve. That tail is really, really needs to be solved in some ways. Part of the reason for that is because those are nightmare scenarios, right?

If you're using twelve sources to fund a development, that's just going to take a lot of time, it's going to increase cost quite a bit. And then five is also pretty high, we want to decrease that as much as possible.

One thing to note is that each source may have its own application, its own rules, its own regulations, which can make the layering difficult. I wasn't a big athlete in high school. I was a nerdy guy. I Still am a nerdy guy, but I know some friends who played three sports in high school.

And for development, it's a similar aspect where you have to win at different competitions in different ways. And so for development to win, you have to win all these competitions in different ways. And it takes a really special development to win all those competitions in a timeline that makes sense.

On the next slide you could see we're going to build this capital stack with some of the programs that we have. The most fundamental program being the Low Income Housing Tax Credit. This is a federal program that's administered to the states. The treasurer's office is the one that delivers the program, and there's two different ones.

There's a 9% program and the 4% program. The 9% program is a competitive program and it can cover around 70% of the development cost. The 4% program is non competitive and it covers around 35% of the development. The numbers here are just kind of round numbers here, they're not exact. So take it with a grain of Salt.

But the 4% program must be paired with tax exempt bonds, and those have been competitive in the past. So in the past we reached our limit on bonds, which made us reach our limit in 4% credits. However, thanks to a lot of push from California and other states, the Federal Government made some changes recently to these programs.

So it greatly expanded both of these programs. One being the 9% program now has a 12 and a half percent increase in tax credits going into that program. And the 4% program basically doubled, we like to say. So now we have much more federal investment that can go into affordable housing that we didn't have more.

So it's that much more important to fill these funding gaps to get this federal investment coming to California. On the next slide, we could see kind of ways to kind of fill that gap. You know, we have all the state housing agencies administer different programs. And you have them all represented here.

Maybe not all of them, but many of them represented here with the Department of Housing and Community Development, the Strategic Growth Council, which administers the AHSC program, which I talked about earlier, CALHFA and then CDLAC and CTCAC. One other source of funding that is increasingly becoming important are the decarbonization resources that the states offer.

However, these are limited by the amount of funding that a developer can get for these resources and the restrictions there. So as is becoming important, it is a constant battle to feel whether or not it's worth it for a developer to apply for these funds.

So putting it all together on the next slide, you can see you have your 4% credits and then you have state funding that's coming in there. You often have local funding coming in and you have a private loan. And I want to make a couple of notes.

One is that remember that every funding source has their own rules and regulations that they have to follow. So the more stacking and the more layering makes it more difficult to layer.

And then the other thing I want to note on the next two slides is that both private financing, local communities, and the Federal Government are all involved.

Often when I talk to folks about affordable housing finance and affordable housing who are unfamiliar with it, they're confused as to why the state has to pay all this money for housing. But in fact, we're leveraging a lot of other funding sources, right?

We're getting rental income and we're leveraging as much debt as possible already when private funding. So giving out more loans may not be as reasonable as one might think because we're already leveraging as much debt, are leveraging our rental income to get as much debt as possible.

We also are getting federal matching here in the 4% program and in the 9% program.

And so this idea that the state's funding everything, it's really the state is providing very, a very important funding source which fills a gap in which we can use the federal resources and leverage private money in a way that actually makes a really true public private partnership and the building of affordable housing.

On the next slide you could see, you could see a funding profile per home finance with a 4% program using the same data set the 2018-2024 data and like the median total development cost being $575,000 per unit.

And you could see on the left the percentages, the average percentages of the funding sources going to the development mapped onto that total development cost. So there's quite a bit of federal money coming in with 37% and the state money coming in with around, with around 21% and private funding coming in 27%.

It is really a public private partnership in this way. And it's all levels of government taking apart in affordable housing. On the other side of the slide, you could see the costs and construction being quite big and the highest with 68%.

I also want to make a note on the next slide that affordable housing is not necessarily more expensive to build than market rate housing, despite the other costs that affordable housing can have. I think there's conversations happening for those who might not know a lot about the affordable housing space that affordable housing is incredibly more expensive.

We looked at data that the Turner Center created where they modeled pro formas for market rate development. Again, these are models, these aren't actuals, it's really hard to get actuals here. And we looked at LIHTC projects. So these projects are funded by Low Income Housing Tax Credit.

And we saw for the most part they were on par with each other. And in some cases the LIHTC developments are even cheaper to build per unit than the market rate counterparts. The last thing I want to talk about is maybe some system improvements.

Mostly about what has been done and what is happening and a couple ideas what can be done in the future. Again, this Committee is talking about that quite a lot. So I don't need to go too much into that, but I do want to talk about what has been done.

There has been a lot of funding efficiencies happening. AB 434 was passed which created the SuperNOFA, which consolidated a lot of the HCD programs into one funding application. AB 519 by Assemblymember Schiavo created a working group to discuss a one stop shop type model and that is happening right now.

The Governor also indicated creating the California Housing and Homelessness Agency to help create efficiencies within the system. I to call it CHA. I'm not sure if it's been stuck yet that CHA has been stuck, but I said it here first hopefully. There's been a lot of ways that folks have streamlined affordable housing development.

Looking at AB 2011 by Assemblymember Wicks in 2022. SB 423 by Senator Wiener in 2023. That citation is way off. And other streamlining bills where we could build affordable housing where it makes sense in a pretty streamlined way. And then things that we could do in the future.

There's a lot of things I'm sure we could talk about here that you would like to talk about. A couple of them that popped out to me during this presentation was this idea of coordination with the Treasurer's resources. The Treasurer's resources with the tax credits are very important to the affordable housing system.

So making sure they're coordinated with the new housing and the new housing agency is going to be important. And also investing in innovating strategies for the construction cost to go down. This could include things like modular factory built and things like that.

I will end it there and thank you for working with me with the presentation and hopefully you're able to follow me to some degree about what I was talking about.

Thank you so much and we'll just. For the sake of time, we're just going to go straight through the panels and then we'll save our questions, all take copious notes because this, it's all very different as we move along. So.

Okay, well, hello, Chairs and Members. Thank you for the opportunity to appear today and really appreciate the intent and tenor of this Committee. My name is Christina Mun, and I'm honored to have recently joined the Business, Consumer Services and Housing Agency, BCSH, as the new Deputy Secretary of Housing Finance.

I come to this work bringing nearly two decades in the affordable housing industry. I've been a partner, practitioner and customer of the state resources.

I've accessed state funding as an affordable housing developer and I've worked in local government where I've designed our programs to work better with state programs in order to leverage state grants, loans and tax credits to make our local projects work.

And so, you know, along the way, I have experienced firsthand some of the challenges that, you know, we've all heard in our system. And I've also celebrated a lot of the state's innovations that have really resulted in important safe, affordable housing for communities across our state.

So in my new role, I'm deeply committed to making our system work better to create a California where everyone has a place to call home. BCSH oversees departments and boards that safeguard consumers, protect civil rights, and deliver critical housing resources. Our charge is clear.

Advance equitable access to housing, protect vulnerable Californians, and strengthen public trust through accountability and transparency. We do this by providing oversight, thought leadership and collaboration on policy and operations across housing, consumer protections and civil rights.

We tackle homelessness and housing affordability across multiple agencies and departments, including the state's Department of Housing and Community Development, which drives housing policy and program delivery across the state. The Civil Rights Department, which enforces fair housing laws and addresses discrimination and partnerships with CalHFA, which you'll hear from soon, and other financing entities to ensure that resources are truly leveraged for preservation and production.

And we also align with other state agencies, local governments and federal partners to ensure that our strategies are integrated. So you heard about the affordable housing finance system generally and specifically, you know, some of the components of it. And it really is, it's a public private partnership.

You know, a lot of this does not get built without public subsidy. So we play a really big role in that because affordable rents do not cover the full cost of what it takes to develop affordable housing and manage it, especially in high cost areas of which our state has many.

At the federal level, we've already heard these tools but we have access to Low Income Housing Tax Credits or LIHTC tax exempt bonds which allow developers to borrow at lower interest rates. Federal federal block grants like CDBG and Home and Section 8 project based vouchers to provide ongoing rent subsidies for tenants most in need.

And then we as a state layer our own financing, including state housing bonds and dedicated programs like HCD's Multifamily Housing Program or MHB, as well as no Place Like Home and others to provide capital subsidies. And then we also have specialized funds to support farm worker housing, supportive housing, first time home buyers and others.

CALHFA also provides complementary lending and bond issuance and HCD fills that final funding gap and enforces compliance. And then on top of that, local governments may also layer in their own money if they have them. So ideally, this system works perfectly and there would be no reason for us to be here today.

But as we know it does not. And our housing finance system is stressed. It's a statewide reflection of a larger national crisis. A lot of communities are facing a housing crisis and we're also facing rising interest rates, rising construction costs, labor shortages. Everything is making building housing harder and more expensive.

The chair mentioned already our statewide housing plan has a goal of producing two and a half million homes by 2030. With a million of those affordable for low income house. You know, we're making great progress towards that. We're laying important groundwork now, but there's a lot more to do.

And our financing tools specifically are often mismatched to the scale and the speed that's necessary to respond to this need. And they don't always work well together, which I'm sure you'll hear more about today.

So we at BCSH, we're actively working to get to those housing goals by taking steps to make building affordable housing faster and more efficient. From the laws that streamline and prioritize affordable housing to the programs that fund affordable housing, we're continuing to push for faster growth.

Just this year, in partnership with the Legislature, we move forward with the Governor's reorganization plan, creating the California Housing and Homelessness Agency. I'll say CHA and the Business and Consumer Services agency. CHA, which is slated to open doors in July of next year, will bring together all state housing, homelessness and civil rights functions.

It will align state programs to reflect the full spectrum of housing needs from homelessness prevention all the way to homeownership. CalHFA, I'm sorry, it'll be anchored by five core entities.

CalHFA, which provides financing tools for rental and homeownership housing. HCD, which leads the state's housing policy planning, establishes and enforces building standards and local government partnerships. California Interagency Council on Homelessness or CalICH, which coordinates statewide on homelessness response the Civil Rights Department which advances fair housing and equal opportunity and importantly a new Housing Development and Finance Committee which will be home to a future one stop Shop and the place where housing finance can be more strategically aligned.

With a sole focus on housing and civil rights, this agency will have a clearer mission, greater opportunity to think creatively and a stronger focus to deliver better outcomes at lower cost. The intent behind this reorg and specifically behind HDFC's creation is to make a more aligned affordable housing finance system.

We want to build upon what's working well and ensure our state investments work together to maximize impact. HDFC is tasked with creating the one stop shop for developer facing multifamily affordable housing finance which dovetails with the work already underway through AB519.

It will approve funding and program guidelines in public meetings to ensure we're more transparent and our stakeholders and the public have access to that decision making. And it will align asset management and compliance across agencies for longer term efficiency, which continues the work established under AB 2006.

So when our programs are aligned, we hope to reduce the complexity and the redundancy that that our project sponsors experience while preserving and leveraging the strengths of each program. We believe this will ultimately lead to more effective state investment and fulfill our shared priority of creating more housing faster and at lower cost for Californians.

Thank you very much.

Thank you.

Hi, good afternoon. Marina Wyatt, I'm the Executive Director for the Tax Credit Allocation Committee and the Debt Limit Allocation Committee. These are two of I think 18 boards, commissions and authorities that are housed within the state treasurer's office.

And as Andrew mentioned, the for our committees, the decisions are made up by our committees that are chaired by the treasurer and then as well as Members from the Administration and as well and the comptroller's office as well. I'm just going to get a little bit deeper than what Andrew went with how the programs work.

The vast majority of the resources that we allocate at TCAC and SIDLAG are from the Federal Government set by we get a per capita multiplier of taxes and bonds that we have the authority to allocate to bond issuers that can be used for that's at Sidlak. That can be used for a variety of purposes.

The vast majority of what we've been using our taxes and bond financing tools for for the last five years have been for multifamily rental housing. As Andrew mentioned, those are paired and must be paired with the 4% tax credit that is also federally authorized.

The way the system generally works is the applicant is going to receive tax credits.

The tax credits have they have brought in investor dollars that are the folks that are going to benefit from the on the private side, they're going to benefit from the tax credit themselves and in exchange they're providing equity into the project that then can be leveraged along with sort of the rental income to get additional private debt to support private debt.

For the years 2010 to 2020, our bond system was generally under subscribed and a large reason for this was due to the lack of additional soft sources that were in the system. And so we were doing we were constantly looking for new ways to bring more demand into the system.

All of that sort of collided beautifully around 2018 where we had additional sources coming in from CALHFA had additional sources that they were able to bring into the system. HCD had additional sources to bring into the system. And we had many local governments that really started putting more local dollars to support affordable housing development.

As a result of that, both our 9% program, which really is just more tax credits that go into each development compared to the 4%. Both that program and our bond slash 4% programs have been drastically oversubscribed since 2020 at a rate of about 3 or 4 to 1.

So you know, we've had to sidlak prior to I've been at the for a year and a half.

So prior to my time there, SIDLAC had to drastically change the program to accommodate this new demand and essentially put together by 2022amore sort of a more thoughtful system as to how do we prioritize and allocate these limited resources for both the 4% program and the 9% program.

We do that by setting putting aside bonds or tax credits to serve particular state policy goals. We set aside funds for home to support homeless or housing that is supporting formerly homeless individuals. We set aside resources for extremely low income and very low income households or projects supporting those households.

And we have a set aside even for CALHFA so that they can pair their programs with our programs and more efficiently work together to get those funds out the door and to support development. And then both programs also have a geographic allocation to ensure that we're making we're getting these critical dollars to all corners of the state.

Every community has affordable housing challenges and it's important that we as a state are providing resources to all communities and to all different types of households as well. Andrew mentioned some changes, some pretty critical changes that happen at the federal level. He was referring to the big beautiful Bill that passed in July.

One of the outcomes of that Bill was this increase of 12% to our 9% tax credit program that will start as of January 1st of 2026. And perhaps the biggest change that we've been in the affordable housing space have been advocating for for many years is a reduction of this 50% test.

So Andrew mentioned and I mentioned that in order to access these 4% tax credits, a certain percent of the project has to be financed using tax exempt bonds that is part of the SIDLAC authority. These generally speaking, as also Andrew illustrated in his presentation, most affordable housing projects can't support a significant amount of private debt.

And so when the program was originally designed, I think the Federal Government imagined that 50% of a project would be financed using private debt. And the Taxes and bonds was a way to have a lower interest rate for that private debt.

What we've learned over time is really that is not how much of a project is supported with private debt.

And what we were used, we ended up using a lot of our private activity bond volume cap that then would access the 4% credits and then would get paid off once a project was converted, once the project was completed.

And so by the Federal Government in the Bill in July lowered that threshold so that in order to access 4% tax credits, a project only needs to finance at least 25% of the costs using these tax exempt private activity bonds.

As a result, we will now be able to finance up to twice, probably not quite twice, but almost twice as much affordable housing on the 4% program as we have been able to.

Our Committee worked very quickly and passed regulations on August 5th to implement these July 4th changes that will have an immediate impact for our third round of bond of 4% tax credit projects. So we at TCAC we run three rounds of 4% and two rounds of 9% every year.

And to illustrate this a little bit, you know in our second round this year we awarded 50 projects, 4% tax credits and bonds.

In round three we expect that we will be able to do at least double that and which will also really help with our over subscription rate and bring down that three or four to one closer to hopefully two to one Again the bigger challenge then becomes can we will there be enough projects that are financially feasible to take advantage of all of those additional federal resources which will continue to be part of I think the conversation as we move through the next couple years to sort of see once sort of we kind of release the demand from the existing pipeline.

What happens in the future out years. And again just a bit of illustration in numbers. You know we on the 4% program we generally finance between around 15,000 ish units a year. So if you can imagine we do about 3,000 on the 9% side. So in 2024 we financed a total of 18,235 units.

And so you can imagine with the 25% test now, this could be as much as 30,000 units a year instead of. So a really big change for California. That's sort of it for me. But happy when we when everyone finishes to answer more questions.

Thank you so much. Appreciate it.

Good afternoon co Chairs and Members, thank you for inviting me to speak today. My name is Rebecca Franklin. I am the Chief Deputy Director at California Housing Finance Agency, also known as CALHFA, a name you've heard a few times this afternoon.

At the highest level, the overview of CALHFA is CALHFA is California's State housing finance Agency which was established in 1975 to provide innovative and effective financing programs to help in addressing California's housing needs. CALHFA does not build housing directly.

Instead we provide financial tools in the forms of loans, grants and other assistance that make housing production and home ownership possible. As CALHFA has a Board of Directors and while we often administer state or federal funds, our operating costs are completely self supported through our lending activities, this does set us apart from our other sister agencies.

I mentioned this unique governance structure because when you combine that with our strong credit rating, one that was just upgraded by S and P last week, we're very proud. AA this gives us what we call our superpower that flexibility and access to private capital is necessary to fulfill our mission.

Investing in diverse communities with financing programs that help Californians have a place to call home and to help address a variety of specific housing priorities. Our programs complement the work done by our sister agencies in addressing the state's continuum of housing needs, the continuum that reaches from homelessness to home ownership. We have two main programs at CALHFA.

First is on the homeownership side. On the homeownership side we serve low to moderate income first time home buyers with down payment assistance and access to first mortgage financing through our statewide network of private lending partners.

Our flagship program is the My Home program which provides up to 3.5% of a purchase price as down payment or closing cost assistance. This assistance is crucial and helps the borrower contribute to the requirements for obtaining a conventional or government issued mortgages.

Mitigating what we find to be a major barrier for low to remote income households which I think we've also talked about this morning which is that struggle to meet that cash for the down payment requirement. We provide assistance at very low cost to the homeowners.

It's just 1% fixed simple interest and when a homeowner repays their My Home loan, these funds are recycled to help the next generation of home buyers. In addition to our flagship program, we've also supported homeownership through the past two years by our national award winning program, the Dream for All program.

I think you might have heard of it. Dream for all is a revolving fund shared It's a shared appreciation loan program that provides loans for down payment to qualified home buyers. Upon the sell 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. In 2020. In the 2025 budget, CALHFA received another allocation for Dream for All Dream for All Phase 3 that was $300 million allocated to Phase 3.

Over the past three years, CALHFA additionally has offered ADU financing and administered the state mortgage relief program using the federal American Rescue Plan act funds or the Housing Assistance Fund. Going into mortgage relief, which is kind of another thing that we I had indicated we do administer state and federal funds.

We did do the mortgage relief funds which was established by ARPA and the Housing Assist Fund that was over $1.0 billion of Covid relief mortgage assistance that came to the State of California.

Additionally to that we coming out of the devastating January 2025 wildfires in Los Angeles, the Governor Newsom proposed a new mortgage relief program for low to moderate income homeowners across the state who have been impacted by disasters like wildfires.

Responding to Governor the Governor's call to action, the College of A Board moves swiftly to approve the remaining unused national mortgage settlement funds NMS from existing mortgage assistance programs. This new program is called the Cal Assist Mortgage Fund.

It provides grants to homeowners who have been who have had their home destroyed or left uninhabitable in a declared disaster between January 2023 and January 2024. For these homeowners who are still paying their mortgage on for an unlivable home, they can receive a Grant up to $20,000 if they meet the income and other eligibility requirements.

The grants have just started going out, but I can share that the vast majority of our applicants were impacted by the 2025 Los Angeles wildfires, but not only we have been able to serve homeowners across the state with this Fund. On the other side of the house is our multifamily side.

We provide financing to developers who create and who are creating and preserving affordable housing primarily through our Mixed Income Program, also known as MIP.

The Mixed Income program provides developers with access to bonds, tax credits through TCAC and a subsidy loan for new construction developments that restrict the units at a mix of incomes between 30 to 120% of the area median income or AMI.

I will call out that most of the units actually are restricted between 30 to 80% of AMI with the MIP program. While that program is calachafe's most popular, we are also widely a widely used bond issuer for other new construction and preservation developments.

We also offer additional financing outside of the state's annual bond cap through our Innovated bond recycling program. But that's not enough. In response to the growing needs for additional products to finance preservation, CALHFA has been exploring additional ways to contribute contribute to that space.

Additionally, Cal is exploring additional partnerships with jurisdictions that have available land to see how we can collaborate on affordable housing developments in those areas. That is all. Thank you. Thank you.

Thank you. Well, good afternoon, honorable co Chairs and Members of the Select Committee on Housing and Finance Affordability. My name is Anne Silverberg and I'm the CEO for Northern California and Northwest Affordable. Affordable at related. Related is a developer of both market rate and affordable housing. And in our 35 years, we've developed about 20,000 units.

16,000 of those are affordable. So it's a really big part of what we do and it's what I focus on. Exclusively affordable housing. I'd like to start by expressing gratitude to all of you as well as your colleagues and your predecessors and of course to staff for particular attention to finding solutions to California's housing crisis.

As you're all too painfully aware, the severity of this affordability crisis is evident in all of our California communities right now. And your strong support for housing dollars in the very difficult budget process as well as statewide legislation that's made it easier to quickly approve and construct new affordable housing throughout the state is very, very much appreciated.

And I want to thank you on behalf of all of the housers in the community for your work in this space. That said, we still have some work to do. We still have a housing crisis here. And I do think that the focus of this Committee is exactly right, in my opinion. It's housing finance and affordability.

This is what we need to be focusing on right now. And I'm happy that you're looking to address this formidable challenge in the state. I've been asked to talk about a few things that are working and a few things that are not working, which I'll recharacterize as opportunities for the future.

But I want to start with the things that are working. And there's. There's quite a list. There are a lot of things that really are working and a lot of really very serious improvements that we are very appreciative of.

Starting with land availability, the housing element, the arena process, the amendments to the surplus land act, the governor's Executive order for the excess sites program. All of these are having the effect of making more land available and accessible for the development of affordable housing in areas like the Bay Area where land is very, very exp.

It's very helpful to have access to sites through low cost, long term Land leases. So that's definitely working, of course, and you've heard about this today and certainly before.

The series of land use reforms, including density bonus and streamlining laws, have completely changed the way we proceed with entitlements and CEQA clearance in affordable housing here in the state.

I have lived through the time in California's history, and I would like to call it California's history, you know, in the past, where we spent years and millions of dollars to defend, to process, to fight for affordable housing. I have been in many of these battles, too many of these battles, and it is completely different now.

Now we'll look at a site and we look at the menu of laws and we pick the law that works best for that site and we proceed. So it really is amazing. I think I've shared in the past that our organization has Streamlined entitled About 2000 or more than 2000 units using these streamlining laws.

And since they've come into effect, some of these are actually built and occupied. And I promise you we would have been processing them under the old system. So that is absolutely working. Another thing that I'd like to highlight that's working is HCD's Accountability Unit.

Their work enforcing laws, particularly the Housing Accountability act, has had a very positive effect. Their work impacts not only the projects that are being discussed, but also sends a clear message to other cities that the state is serious about housing accountability and will enforce its laws. So we appreciate that.

I'd also like to highlight something that I think is incredibly effective and that is the Tax Credit Allocation Committee and the California Debt Limit Allocation Committee. TCAC and Cidlac. The transparency, predictability, the structure of these committees, combined with the staff under the excellent direction of Marina Wyant.

I didn't know she's going to be sitting right next to me is a model of efficient and effective resource allocation for the State of California. It's a model actually across the country as well as practitioners, it is so helpful to have known and clear process with current updated regulations, frequent application rounds, very quick awards.

And Marina talked a little bit about the recent federal law that passed. And I just want to highlight some of what happened there with these recent changes. Just last month, just July, the TCAC Committee and SIDLAC Committee acted very, very quickly.

In a very short time, emergency regulations were drafted, they were released, comments were accepted, they were rewritten, they were put into effect. And it's now providing a path to preserve very valuable resource for affordable housing in the state. We work in other states and other states are still getting their arms in their heads around this new law.

And here in California, because of this action, we're already preparing to make these resources available for production. So this really is to be commended. All of these important actions have resulted in significant savings of time and money infused critical certainty to the process, which I can't emphasize enough.

And it does enable us to bring more projects forward for development. And so I'm going to highlight one more thing and then I'm going to move on to our opportunity areas.

And I will say this despite the fact that we still have challenges, we have been able to make some inroads and actually deliver affordable housing to those who need it. And this is working. And I will say it's extremely meaningful. And I'm sure you all know this.

But if you're interested, we're very happy to have you come and visit any of our properties. And I'm sure our colleagues in this space are very happy to host you as well so that you can see the impact that affordable housing is having on the individuals and families that live there.

And I'll just share a couple of stories. We recently opened development in the South Bay, and a resident shared with me that she had faced a number of challenges, including homelessness, until she and her two children, one of whom is special needs, was able to secure an apartment in our development.

And she toured us around in her apartment and it was filled with family photos and children's art. And she said, you know, this has really turned my life around. It has really made a significant difference.

I'm going to share another story, and this is an older story, but this is one for a woman who moved into affordable housing in San Francisco in the first grade. She and her family had been living in sros. They were too small, unhealthy, unsafe, and they were able to access affordable housing.

And she talks about having a room and more importantly, having a desk. Where she studied through elementary school, through high school, she was accepted and graduated from Stanford. She has a great job. And the thing that she has and our other resident, and so many other residents, is that they are now in affordable housing, thriving.

And with each new unit, we have the opportunity to change a life. And it's really meaningful and this is working. So I just wanted to highlight that for you. But I will say, unfortunately, even though it is working, it's not enough. It's not enough.

And no matter what measure you look at, whether it's rent burden or homeless counts in the State of California, we're falling further and further behind each and every year we are not producing the number of housing units that are needed to address the need in the state.

And I would submit to you, the reason is because we're not providing enough funding for the production of that housing in the state. We just, we need more funding. We need more funding.

And some of what Marina was illustrating, where we have actually even more tax exempt bonds and access to even more credits, just emphasizes the importance of having more funding. We see this plainly in the competitions for state funding resources. Some of them are oversubscribed 4 to 1. 5 to 1.

In the case of the MHP program, it's oversubscribed 11 to 1. What that means that for every one project that goes through, three or four or 10 others are stuck and they have to reapply and they're waiting to move forward. We could build that housing right now if we had the money.

And that's why I'm emphasizing the importance of funding. It's important for us to move those housing projects forward because the individuals, the families and the children, like those that I just mentioned, they're also stuck waiting for their opportunity to access affordable housing. I know that there are many challenging aspects to our housing delivery system.

The excellent presentation illustrates how complicated our system is. And I do know that there are a number of people that would rather fix the program than Fund it. And I completely understand and agree with this sentiment, except that I think we need to do both. We need to fix it and we need to Fund it.

And I know that the structure is complicated, in particular because of the Low Income Housing Tax Credit Program, the LIHTC program, which is a federal program, it's codified in the tax code by Congress.

It's not ours to fix, but it's so complicated that sometimes it leads people to think that we should abandon it or we should develop a new system around it or on the side. But what I would say to you, problem is love it or hate it, the LIHTC system is the baby, not the bathwater.

And I would say that to you because LIHTC brings in 150,250,400 in San Francisco, 500,000 a unit. It's too much money to not pay attention to. And so I think that our job is to determine how best to use this resource for Californians.

We need to dramatically increase the funding that's used with tax credits and be efficient and effective in administering these dollars to increase the supply of new housing in the state. Let's take advantage of this recent change and build more Housing. So I have some specific suggestions. Some of these you've heard from me before.

And this is in the area of funding one, the housing housing bond. I can't emphasize enough the importance of the housing bond right now. The housing bond is critical for providing the level of funding that just isn't possible through the budget. And I hope that the Assembly can lock arms with the Senate and move this forward.

We in the housing industry, we will work on it. It's so important and we appreciate your support of that. More General Fund money. I recognize what I'm saying because I know how difficult this is, but it was really a difficult process.

And I think so many of you who fought the fight for housing resources, but whatever can be done to increase those resources in future budget rounds, we really appreciate it. State credits are funded through the General Fund. They're incredibly efficient. We could use 3 or 4 times the amount that we have. MHP was funded this year.

We could use 10 times the amount that we have. Perm source. Once the bonds are passed, I hope that we can turn our attention to a permanent source. I think it's a great focus area for this Committee. I believe firmly that a true permanent source could radically change the way housing is delivered in the state.

Rather than this unpredictable and piecemeal approach that we've used historically, having a robust, steady, ongoing, stable source of funding for housing could infuse certainty and predictability to the process and dramatically increase efficiency. Just having that stable source of funds, we could increase SB2, recording fees, transfer tax, have a dedicated source from the budget. Other states do that.

I think it would be great if this Committee could take that up. I also suggest that we implement a holistic and thoughtful plan to address homelessness. This includes shelters, transitional housing, permanent housing to support houseless individuals and families.

This work needs to be done in conjunction with a clear plan if we're building permanent supportive housing, to have a way to support that housing not just as it's built, but ongoing as well.

I don't think it makes sense to continue prioritizing or providing a preference for PSH units if we are going to produce those without the ongoing support that they need for the residents and for their operational help. And then I will also two more second to last bring back local funding like redevelopment agency funds that we had before.

It don't mean necessarily resurrecting the old form of redevelopment. But it would be very helpful for this Committee to explore how a similar mechanism could be developed to Fund affordable housing development before the dissolution of the redevelopment agencies. 20% of the tax increment was made available for affordable housing.

And this gave local governments incredible flexibility and agency to Fund affordable housing, including pre development acquisition. Gap funding. The gap funding that we've been talking about and now, you know, it was about a million, excuse me, $1.0 billion a year awarded. And that source of funds is missing. It hasn't been replaced.

So no wonder we're falling behind and no wonder we're taxing these state resources that are now so incredibly oversubscribed. The last suggestion is to administer our funds more efficiently. You've already been hearing about the efforts that are being made. I am now going to adopt the word Cha as well, or the name Cha.

We're already making progress with the reorganization of the housing agencies into chaos, but we also need to address and change the way we operate within the agencies. I think it's great to consolidate the agencies, but we need to think about how the agencies are operating or agency.

And you know, this Committee may tap into or expand the scope of the working group that was established by AB519, or set up a separate working group of users who could give very concrete suggestions of how to administer funds more efficiently or where they're seeing some of the inefficiencies that exist.

I'd like to just emphasize, though one more time that being efficient is really, really important, but it doesn't replace the need for additional funding to solve our housing crisis. So, so many of you have made such an undeniable mark in addressing the ongoing crisis.

And I really think that this Committee has such great promise and I really appreciate the energy and the leadership that's coming with this Committee and we want to support you with your efforts. And I'm happy to answer any questions. Thank you very much.

Thank you so much, everyone. This is a really complex space. Whether someone like myself that's been in different spaces for 30 years and all of you have occupied different spaces, and it's a moving target. It just changes, you know, with the economy, with the market.

And so this Committee, you know, we all have a passion and a commitment to this and it's, it's going to be an educational journey and it's going to be a painful one because we're going to have to get in spaces that we're familiar with and spaces we're not so familiar with.

But I think all of my colleagues are committed to trying to understand this space that's super complex and, and has many moving targets. But I would like to just pause here and turn it back over to my colleagues and see if there's any questions we have of panelists.

Yes, thank you, Madam Co Chair. First, I want to thank you for inviting me onto this Select Committee as a Member of the Registered caucus and a Member of the I Can't Buy a House My Own District caucus.

I greatly appreciate, appreciate a more in depth look about housing finance because I truly believe that we the past couple years have really entered into the modern reform era where we have lowered the barriers against NIMBYism, against restrictions on zoning and building and housing. And that is very important. But the modern bottleneck we see with. The.

Finance rate, interest rates and everything in the recent time, the real bottleneck now is the money aspect. And I think the real question in a time of scarcity for us in the state budget is how do we efficiently employ our dollars to maximize the amount of units we have?

And I think that's really important because I do believe, as many of our speakers talked about today, is we need to make it more efficient but also simplify the process. Making our developers of all sorts go through 15 different games and criteria adds to the cost.

And so I've always been a big advocate of simplifying, unifying the cost as much as possible. So I have some questions for our panels here today and so I'll try to ask them also quickly so that other Members can ask. But I do have a series of questions.

So I just want to ask and maybe this is more appropriate for our deputy secretary of housing finance or whoever wants to take this one. But you know, I want to just ask is in.

So let's just say our modern era of Reform20172016 whatever you want to put it, you know, there has been a goal out there from the Governor and many advocates about building a million affordable housing or housing or homes for low income individuals. How far along are we now in 2025? How many units have we built?

And then secondly, if we're to get to that goal in the current system we have, how much more money do we need to inject into the system to even get to that goal?

That is a really good question and I wish HCD was here to share great stats with you. I do believe that I saw an estimate of about 650,000 affordable units have been invested in by the state and what it will take to do the rest and the flavor of those units. Right.

And the type of policy priorities we're trying to hit. I would really love to bring HCD into this to share good information with you about that. But that's super important. Thank you.

Yeah. And I think it is. Yeah. Thanks for that. It's definitely as we look at the metrics, it's important to look at how far we've gone. I believe one of our own majority assistant majority leader on research policy and research highlighted that.

I think in the last arena cycle we only did 500,000 of all types when our goal was 1.2 million. So we're still behind as we've all talked about. I think it's important in this Committee to look at where our metrics are and then even the current system, let's say pre reform.

All the great things that CHHI is going to do in unifying pre. Let's just pretend we're in the current system. How much more money do you have to inject in it? The second thing I was going to ask for, Cal HFA too is. So you were talking about some of the down payment programs.

There's different programs of course, in addition to DREAM for All. So we've injected several hundreds of million, maybe close to a billion now over this multiple phases. Those are all loan repayments. Correct. So that the, the, the person who gets the loan has to pay pay back to the state the money. Right.

So yeah, for both technically my home as well as DREAM for All they would be repaid upon the house being.

Sold or transferred upon the transfer or sale. Okay. So then that money itself isn't. Even though say we said three phases. That money is basically locked into the equity of the house until the sale is to happen. Right.

The sale or a refinance. There's a one time refinance for DREAM for all.

One time refinance. Okay. I just want to highlight for that program, you know, as it was in the past some things discussions we had in the budget Subcommitee about who are the recipients getting those programs.

I don't know if you can share any more of that because in the past we've highlighted geographic non diversity and demographic non diversity to it. But can you share about where we are now with different phases what that demographic of people who've Received this looks like now.

Yeah. So if we combine the first two phases from an outcome perspective for Dream for All, the program itself has helped over 4000 first time home buyers realize the dream of homeownership across our state, geographically dispersed as well as we're very proud of 65% of those buyers of that 4,000 identified as belonging to a community of color.

So I think that the geographic dispersion because in phase two of Dream for All there was geographic set asides. So not only have we reached across the state geographically, but also that 65% of people are self identifying coming from a community of color. We're both, we're very excited about the impact we've had.

It was definitely an improvement from phase one. So I also want to highlight for the Committee is that under the current Dream for All program, while it's we're good and we are limited in resources, it is limited to people who are first generation home buyers in their entire lineage.

So if you were to have a parent and you know, you're not hoping for them to die and then get their house, they are not eligible for these programs even if they're under the eligibility criteria. So that does limit a lot of people who want to grow their families in here. Right.

So something for us to highlight as well. And then I wanted to ask about as CHA is combining and doing this work, which I understand the reorg is not going to be done until almost end of 27 or something like that. Right. Or something like that.

In the near term, are there steps you can take to unify and simplify the process of applicants right now? Because that is what you're striving to do. But I'm just wondering in the meantime, is there things you could do to get us more financing out more quickly?

I think that's a really important question because as we're thinking and planning out the implementation of the reorg, we don't want to ever get in the way of the funding rounds. That's number one, that's baseline.

But then on top of that we are talking about how do we take the lessons we're learning and what we're hearing through the 519 work groups and other stakeholders expand our outreach. So we are feeding in to the planning of chha. I think there's interim steps that will happen.

I can't say exactly what those are, but we are thinking about how to make it easier to reapply, you know, for HCV funding. Like how do we take away some of that friction in the system Even before we have the perfect kind of one stop shop solution, which is still the goal. Right.

But we are thinking about the steps along that path.

Okay. And this last comment is I appreciate CALHFA talking about the programs and how, you know, some of these are different equity models and the repayments because I do think as we think about injecting more money into the housing finance world, I do think especially a limited time of scarcity.

Our model now is tax money in, tax money out. Okay. We give developers, nonprofits, if they be, and that money's gone. And every single year, you know, our colleagues here, we have to fight the Governor Administration to get all that money back.

But I do think in a time thinking about housing finance, we should think about how do we make a, a good deal with the taxpayers and saying we're going to take a bunch of money right now, put it in something like a recycled revolving loan Fund, give it back and simplify it because we need to think about how do we have a stable, permanent source of financing.

So I appreciate our speaker talking about that because I'm also a proud Member of the Tax A Rich caucus. So we should also find ways to do that. And I appreciate again all the presenters coming here. So thank you, Madam Chair.

Assemblymember Quirk-Silva.

Thank you to the co chairs for bringing this forward. This is definitely a topic that I follow quite a bit. I have some questions and comments. Some of them you may like, some of them you're not going to like.

And I'm not going to apologize for that because this is now 11 years in and I've been part as a profession in two big systems, one as an educator for 30 years and now this as a second chapter. And now I'm entering my last. And so there's good news and there's bad news.

I'll start with the good news, which is my colleagues here, we have all these young, fresh faces and young by age as well. And so they have a whole nother decade to explore and to ask questions and to push this forward. And we have made progress. So I appreciate that. We don't always celebrate the winds.

And there has been progress made, I think this last few years with of course the CEQA legislation, the surplus land, there have been units built and so there and there are some people who don't want to celebrate any progress. It's just it's cost a lot of money. So it's not.

But we know lives are changed when they're actually people are housed. The intersection between homelessness and housing is A real data point. And they're not separate conversations and they shouldn't be because we know that we are pushing people to the streets faster than we are housing them.

And some of even this year's big beautiful bill really terrifies me in the sense that that we're looking at Section 8 vouchers, all of these new things that can add. So there's some real concern there. But my biggest, I'm very perplexed about this because as the budget chair of some five were housing and homelessness.

We vetted these issues and one which was now changing HCD and Consumer affairs and making them a standalone. If you were following that, you'll note that I was not completely supporting that for a few reasons.

One of the reasons is it was not told to me and I don't believe it's even true to this day that just because you take away a responsibility like Consumer affairs that now we're only going to focus on housing and everything will be streamlined.

What was not said was the bodies are not all moving into the same building. And maybe I'm old school on this, but if you still have people in different state Department buildings, they're still going to be doing Zooms, you're still going to have this kind of disconnection.

There was also no metrics provided to us and we've been hearing, well it's going to be faster, it's going to be more transparent, it's going to be a one stop shop. My question is why haven't we been doing this for the last decade? We don't need permission to do this.

We don't need to wait till you all move in, if you even are going to in 2026 to do this like the clock is ticking. This all could be happening now. And I bring back education because we get new mandates every year as teachers.

Now you're going to do whole language and now you're going to do only phonics and now you're going to do this math program. And we can't say, well we're going to wait for a year till we're all on the same page.

So my plea to you and to take back to HCD and I feel like I can say to the leaders there, they know my opinion, which is whether it's 2026 next July or six months after that after you move in, we don't have the time to wait. So please start working on the streamlining.

We've had the bills, we've had the legislation. Daley did a bill, it's listed in here. This is not new. We've been asking for this one stop shop for developers particularly but most importantly to get the units built. So please, whatever you can do to expedite this streamlining.

This seems to be one of the biggest issues that and then related to the taxes. I know it's a whole nother arm but there has to be some communication to move these things. If we can say anything good of the pandemic is there is zoom opportunity so you don't have to walk over.

So in some ways I'm kind of saying two things but we have to move these. I hear numerous times about applications in cities who are waiting to hear and somebody maybe there's even an appeal and they're waiting for somebody to get back to them.

So please on that, on the next part that I'm very perplexed again having numerous hearings on this through the budget part was HCD came to us this budget year and told us they're good on funding. There's so much money in the pipeline, so much money that we really didn't need to ask for any more money.

And by the way, the Governor zeroed out all the dollars. So from January until May, all the low income housing tax credits, the multifamily housing that was zeroed out, we had to fight, really fight, have some aggressive conversations and we ended up getting close to a billion and a half.

But those talking points are really an important note which is we are never good with the amount of money we need to build this housing.

So to even state that in any way but it was stated two or three times in public forums, our hearings that's just not acceptable because we know if the money is going out, it's going to be used and then what's going to happen in two or three years from now. So please have that discussion.

That was not acceptable because we had to fight hard with the Governor and his team to bring those funds back in. On the positive side, I'm really happy to hear about the low income tax credits. I myself have worked in that space with getting some legislation related to flexibility. We know that's important.

I appreciate my colleague mentioning the permanence of those type of funding. So please speak to us if there's something we can do. Right now as we're talking about the bond to get that language in because sometimes it's one word and that can make all the difference. I do like your term of fix and Fund.

I'm going to start using that. I think that's a really bright way I was on local City Council. I'm just really aging myself now. 15 years ago when we had redevelopment and I know I was there when Governor Brown was there and we moved forward.

I would say certainly we want tools for local government and incentives to get some of this housing built. But a lot of this lies in the California State budget and we've been extremely limited in the last two years.

And going into next year, I don't see it just opening wide up, which goes back to the places how can we build these units? I think one of your presentations was 500, close to 600,000 for a unit, affordable housing unit. You know, I'm really hopeful that there will be some different alternatives.

And I know myself and others are taking tours this fall. We're actually going to go look at some modular housing. We're going to look at different ways, but that price point, sometimes I've heard even $700,000 for an affordable. We have to be more innovative with opportunities to look to build different sizes, shapes and so forth.

But with that, I am hopeful. I have seen progress. I'm hopeful because this team here to me is incredibly bright. I would just say one area that was not touched on at all today.

And I'm really pleading and hoping we can get a bill for ADU financing because we know that's been a bright spot as far as the numbers of units.

But there is also a capacity out there where people my age have the land, want to do it, but the other than taking a second out on your home, there are very few options out there.

I know there's a HELOC and so forth, but getting through banking, a bill on financing and banking World, understanding that this is a good investment for them because in many ways they haven't. It's usually a construction loan and it's just not a fit for an average. I know we talked about that before.

So with that, I don't know if I asked any questions. I just talked a lot, but I think you hear me. Thank you for all your work.

Thank you so much.

Hi. How's everybody doing? I came in towards the tail end, but I did have opportunity to read over some of the slides that were provided. And so as my colleague mentioned, I'm the Assistant Majority Leader for Policy and research. And so we pulled together a affordability briefing to give to the Democratic Caucus.

And so I just wanted to ask a couple of questions too, as it pertains to that. But then listen to Ann. Okay. To Anne's conversation. When I first came in first off, you were saying that you said there was 16,000 affordable housing units that was built out of what, 20?

Oh , that's just our history in the last 35 years.

In 35 years, out of how many? Out of 20,000. Okay, so when it comes down to the affordable housing, I wasn't here for the first part. So my first question would be then how, how are we defining affordability? Have anyone actually addressed that in their presentations on what affordability actually is, how it's been defined and looked at?

We did not define that, but we like to think of housing affordability as folks spend household spending 30% or less of the income on, on housing costs.

Okay, so when we're saying 30%, according to some of our information, we're saying that in 2024, the fair market rate for two bedroom apartment in the state was $2,464. And to afford this, that goes into the paying more than 30% of their income. And that means that they must earn at least $98,545,000 annually.

And so that translates into $47.38 an hour, which is the most expensive within the nation. That's where we're at. So in your report, I don't have the habit page number, but you're going into California's needs of at least 1 million more homes in low income households. What are we doing to address that? Knowing that no one's.

There are people that make $47 an hour and 38 cents. Right. But then when you go into the low, you have extremely low and very low income and then low income. What are we doing to address that side of things? Because that's not balancing out per se. So can you speak to.

Yeah, I'm happy to talk to a little bit about that. And with my presentation on, you know, market rate, rents are never going to get to populations that are extremely low income or very low income in a lot of ways.

And so that's where public subsidy becomes very important to fill the gaps in order to make it affordable or to make affordable housing actually pencil out. And so this talk about funding is super important about that because state funding provides a really incredible resource to actually fill that gap.

So we could use those federal resources and private lenders in a way to actually make affordable housing pencil out for the people who are making less than $98,000 a year.

Okay. So if it's the public subsidies that we would need to be looking at and some additional state funding that goes back to what I was going to ask Ann and all of you can do it, then what other programs are in place? Meaning how are people qualifying for the programs?

Number one, some of it is based on the federal poverty level, some of it's based on other things and so forth. But then when it's coming into some of the home buyers assistance programs or whichever, how are people qualifying?

Because a number of people who are qualifying are not particularly falling into the categories of those that are extremely in need. And that's going into the access side of it, of the affordability of their debt, their credit score and their livable wages. So how are we distributing that Fund and is it being distributed equitably across the board?

Because I'm big on addressing equity and access and I would like to hear a little bit more about that.

Yeah. So to. In the application process, many developers have to say what AMI levels are reaching. So area median income levels are reaching. A lot of programs specify for, you know, they award points based on how low of a level they can reach for AMI levels.

So depending on the application and what they're funding, you would have to reach those AMI levels for the development. And on the development side, they would have to check the incomes of the individuals applying for the housing and might know way more about that than I do, but they have to check the incomes.

And every year I want to say, they want to make sure, they have to make sure that they're still consistent with the income levels there. But then does that kind of answer your question?

It's going into it. But then if we're checking the incomes, once again, some of us, and I'm going to just throw myself in there because at 1.0 I did not qualify for a number of things, whether I was too high on one end or, you know, whichever. So what about those people that meet in the middle?

Because for different parts of my district, we know that the housing itself is based on the actual, the median income. Right. And the median income within the area is not always going to be the same for everybody else. And it varies from the city to city.

So for example, in Lehman Grove, I think it was once again 90 something $1000. Therefore the rents are going at a different rate.

So when we're talking about people being eligible for income based on their income, once again I'm going into how are we assisting those or finding some other way or giving you some recommendations for us to assist with making sure that we are increasing access and not solely always going off of.

You need to have three to four times the amount of money in your bank account to accept. Not everybody's going to have that. So what else can we do to ensure equity but also access because we how the homelessness, homeless crisis is increasing and it's because a lot of people still cannot afford to maintain in their homes.

Before you go to that, I'm just going to tell you that from one of the reports that we have the following estimate for the monthly mortgage payment and property taxes for the median homes. And that's showing the actual percentage in LA itself for median income for April 2025, the sales rate for a new home was 1,039,000.

And then the estimated monthly mortgage and property tax is 8,066. So that means the monthly county 2025 area median income, the HCD is 8,883 thousand. But the mortgage and property tax as a percentage of median income is 91%. That's LA. So if I go to San Diego, ours is about 71%.

And the average median the house is being sold was 990,000. And it continues on. So the idea of being able to purchase a home for so many is so far, few in between. So what can we do to try to correct that? I'm sorry, I almost just. No, I mean, you don't need to apologize.

This is our show, so this is. What we're here for.

I gotta adopt mother car colleagues. I'm not sorry, but can someone just kind of help me understand where we're going with this?

Yeah, I can start and then I invite my colleagues to join in. I think you're speaking to the whole spectrum, the whole continuum that we need to respond to housing needs. Right?

And so when we talk about how do we leverage our scarce resources for deepest impact, it really is thinking about on that whole continuum, where can we intervene in the most impactful way? You know, we're trying to prevent people from falling into homelessness. We're trying to pull people out of homelessness. Right. And get them housed.

And at the other end of the scale, homeownership is out of reach for many. So we are thinking about that whole range. A lot of HCDs subsidy is geared towards prioritizing deeper affordability. So those 30% units, you know, even 50% units, we just are not going to get that from the market.

And so we really do need that extra subsidy to get us there. And that's going to get us the ELI units that are going to house people that may have been experiencing homelessness or could be at risk of homelessness. And that fits into Just an overall state priorities of addressing the crisis.

But it doesn't mean that we don't want to do other things. And so if there is a way to mix units, kind of recognizing that it's really hard to do only homeless units in a project, a lot of projects will have a mix of affordability with different tiers.

And so there's a range of applicants getting to the idea of access and equity, trying to have a mix of units so that people in one community can still access different levels of affordability. And at the same time, I think you're totally speaking to a really critical piece which is the missing middle.

We just do not have great solutions yet to that. And some of it is it's not going to be the best use of our stuff subsidy, you know, to put it all into, you know, creating middle income housing. Probably, you know, it's a discussion to have.

But I do think there's a way that the state has been thinking, local jurisdictions think about how to unlock the market to deliver those units more cheaply and therefore hit a level of affordability for middle and moderate income households.

So, you know, how do we encourage, you know, units that are, you know, they're not super low income, affordable forever, but they're like pretty affordable and not the crazy market rates. Like, how can we encourage, you know, building typologies that can enable that?

How do we unlock the land use through the housing element process and really push jurisdictions to like Ann said, like open up their book, like, what do you have on your map that can turn into housing? And like, let's do those and do it quickly and cheaply. And so that's sort of the interventions that we have.

And then, you know, we do have homeownership programs as well.

And I think also to your point, I mean, and this is why I love that you're part of this Committee. You know, you're always looking through that lens of equity and unfortunately, housing, it's an outdated model.

As someone who's been in that space and I think this Committee, what's really exciting about this Committee, not only the talent and the perspective that we all represent different areas of California, is that I think we have a really unique opportunity because we are charged by the speaker in different areas from childcare to housing, to address the affordability.

And I think this is our time to be uninhibited, to really speak with clarity and direction and to educate ourselves in spaces that we don't know, in spaces that we do know that aren't working to Recalibrate a lot of the state agencies.

But I think going back to my colleague's point, the missing middle, you know, the social infrastructure, what I call the housing economic ladder, the very low income, that is where the Federal Government was structured, the Department of Housing and Urban Development, which is under attack now.

States weren't really set up to take care of the very low income and the very low income, fixed income individuals, our veterans, our, you know, mobility impaired individuals who will never be able to, because of life circumstances achieve, you know, having an income to put them in the home buyer realm.

And so the rental market is so critical in that space and it's the least funded compared to the homeownership side. And so I think this Committee is, you know, how do, how do we balance that?

And you know, beyond those logistics, we have a poverty problem and we can't solve the housing crisis when we're not addressing the poverty problem. And so I hope part of our dialogue here is going to be talking about the poverty problem that is tied to our education problem and those two together.

50% of the state's budget goes to education. But yet the outcomes of our education system aren't putting people in a socially economic position to be able to position themselves to housing. And I know my colleague, I know that's a space very dear to your heart.

So yeah, I had that down.

Did you? On the homeownership side, I wanted to address some of that and the equity of that. So calhfa, I think one of the responses we have is diversifying the products that we are offering to homeownership. So in the last year Calhou Bay has actually launched a second down payment assistance program that's in the My Access program.

So combined with my home and my access, that's 6% given to the homeowner for a down payment for homeownership. Because a lot of the times, some in certain situations the, the mortgage is less than the rent, right. In certain communities.

And so, and that access to capital in order for the down payment is really kind of a big barrier.

The My Access program and what the, the great thing about that 6% is is it unlocks financing for factory built homes so those homes are able for a homeowner if you have the ability to go and purchase a modular or factory built home, you can now use that, our down payment assistance programs in combination to be able to finance that through a governmental like a GSE back loan.

So I think that does not solve your problem. I didn't in any way shape or form. The other thing I wanted to highlight though, education and financial literacy in the homeownership space. Cal additionally through the NMS National Mortgage Settlement Fund does Fund HUD certified housing counseling.

It's a free service provided to all Californians regardless of whether you're a renter or a homeowner. And they do do mortgage counseling. So say I go in and I say I want to buy a home. What does that look like in that Financial literacy.

So I think it's also educating people what's out there, but it's also educating them about their financial position and what they can do to help get there. It's not the solution, but I think it's steps that we have taken in the more recent time to start getting us there from an equity perspective.

And I'm going to I'm really curious with my colleague from Southern California because I do feel like we need to dedicate some time and space given I still have zero, you had new. Zero I'm sorry.

I'm almost done. I promise. I'm almost done. Because you went into my education part of it so quickly.

Just saying on that as we continue to have the conversations about building and making sure that we have enough housing, it boils down to what was already pointed out of we can house folks but do they have the ability to sustain the housing that we are currently providing? So that is a big point of it.

Just another suggestion. And then I told you I'll give it to you.

Give it to you was I would like to start to hear and or see within reports though in regards to us including the gender disparities because as we're looking at the access and the equity side of things, too often we are leaving out the conversations for the bipoc communities within itself.

And there's a 53% of women renters, they live in the affordable housing compared to 47% of men. So really addressing that part of it and also the fact of 63% of black women and 54% of the Latina women are rent burdened.

So as we continue to think about how we're building and what we're building and where we're building and the cost of that, not only is it just going into the overall your full income factor, but then looking at the gender disparities as well and then there's a qualification component that comes to that.

We may not want to acknowledge that but too often some of the qualifications is your approved and or denied. Some of that does still play into the factors whether we want to acknowledge that or not.

So I would like to see a little bit more of the gender disparities also being addressed as we continue to figure out how we're going to address the affordability crisis within the state. So I will pause there. Have more, but I will pause there.

You don't need to pause. If you have more questions, we can. I thought you were finished, so I apologize. So you can finish because again, this is is our time. So finish up your thoughts because I don't want to interrupt your thought process. So let, let, let's keep going. I see your notes now, so.

No, I mean this, this is, this is just where, where I am, where I'm going. I'm just going to summarize it because I'm pretty sure that Harvo probably has some other things as well, knowing that you've been impacted by fires and all these other aspects that come into play.

But it's just for me, is still sticking with the equity and the affordability conversations. And my last question that I will stop here though, was going back to Ann with the programs that you guys have had and once again, still the qualifications. But what actually comes with those programs?

Are there additional coverages to ensure that those people that are successful in the program are able to sustain? And what do you think that we can take away from your programs to probably replicate across the state? And that would be my last question.

Yeah. Okay. So we're a developer owner and we use the programs that are being made available by the state or the locality where we're working, or in the case of tax credits and some other sources, the Federal Government. So we respond to the requirements of all of the funding programs that are made available to us.

We understand your point, though, and this is part of what I was saying also that, you know, it's very important as people income qualify and move into a development, sometimes that's all they need. They just need affordable rent and they're on their way. But others may need more support.

And so I do think that services and other kinds of support are very, very important. And I think that's particularly important when we're housing folks who are transitioning from homelessness or they're unhoused and they may need additional support.

So the point that I was making is it would be very, very helpful for the Committee to look at how we combine both the capital sources that are made available to make that housing available in the first place, but also the ongoing support.

And, you know, I think your point is very valid that a lot of the support has come from the Federal Government, but are, you know, questionable in the future. Like project based Section 8, we use that a lot to support the tenants. But if that money is not available, what will we do?

And I think that we just need to be thoughtful about that.

Thank you.

A lot of people are on that Section 8 list. Sorry, a lot of people are on that Section 8 list and they've been on it for 15-20 years, 25 years. Yeah.

So being able to educate people a lot more on how they can move from Section 8 move over into home ownership would be great. Looking at the voucher programs and other options that people can utilize.

So I think we just gotta continue to talk what we can do to move people through the process and not have them be complacent and staying so we can move the unhoused to house and still move people on the process. So thank you guys for--

I can, if I can just add a lot. Of the questions you asked and also some of you asked some questions on data and we have a lot of data that's disaggregated by gender and ethnicity. And things like that as it relates to low income households and affordable housing and affordable housing production.

So I'm happy to work with your offices to get the data you want on that side as well as district level data or county level data as well as you need it.

Thank you.

Thank you Madam Chair. And thank you for the discussion. I mean fascinating and, and very educational. And you know, I do want to thank my colleagues for asking such good questions that many of which were answered that I had.

And, and I do want to give a shout out to Assemblymember Quirk Silva for everything that she did with sub five. Actually getting that number from zero, it was zero to $1.5 billion. That was really a Herculean effort.

And that was, I think that will, we will look back on that and that'll go down in the history books because many people are going to get housing because of that. And it's crazy that we had that fight internally between the Executive and the legislative branches and that kind of shows you where we are.

And I want to pivot a little bit to something different. I mean I have a lot of questions about, we talked about already, but I want to focus more on costs. I mean this is a math problem to me. We're trying to figure, figure out affordability with housing.

We're trying to build it in a more affordable way, in a cheaper way. And yet it seems like we're just constantly behind the ball and chasing ever growing and ever increasing costs. And we see a couple reasons why that happens.

Land is incredibly expensive and would love to hear anyone's application of ideas of how to deal with that. Labor and building anything stick built is extremely expensive. And there are perverse incentives to affordable Housing financing with lihtc for example, the more expensive it is, the more Li tech you get. And therefore it's just kind of this ever.

It's almost like a treadmill unless we get the costs in order. So what can we do? And we haven't really talked about costs. We haven't talked about what we could do from a legislative or regulatory standpoint to actually keep costs down. I have a few ideas, but I'm not an expert. You guys are.

What can we do to figure out that side of the ledger? Everything we've heard today, everything we discussed about is completely the opposite end of the spectrum, which is pump more money in because everything is expensive. Well, how do we make it more affordable? How do we make land more affordable?

How do we make labor and building more affordable? The market rate panel, I have other issues. I'll talk to them about that. But can someone throw out some ideas that we can pursue? Because every time you upzone, every time you make it less regulatory burdensome, guess what?

All the studies and all the research shows that costs just continue to go up. You make it easier to build multi unit housing on a R1 piece of property, that piece of property goes up 3x. That's a problem. It makes it harder to build affordable housing even if you're upzoning because the underlying dirt is just so expensive.

So I haven't been able to figure that out obviously for decades. We haven't been able to figure that out. What do we do?

I can't answer all of those questions, but I do want to just also since you brought up lihtc, I do want to kind of highlight that in our program we do have a cost efficiency metric and our tiebreaker really does prioritize efficiency of resources.

So there is a real incentive for the developers to keep the cost as low as possible. But also on the second side, and Ann can probably speak to this more, we are also looking for high quality rental housing to be built.

And a lot of these projects are not getting recapitalized until 20 years, 25 years in some cases, sometimes longer. So you need to invest in the high quality buildings because it's not going to get another influx of of dollars to rehab these buildings as frequently as market rate housing might too.

So that is going to be a component to why there's in Andrew's slide, there's a slight difference perhaps in cost. But again, our program, the bond program really does look the tiebreaker is fully based on a ratio of resources being asked for and what's being produced.

Yeah, I think you're right. We've been talking about this for decades trying to solve this problem. I would love to believe that we're going to solve it right here, right now. But I think that the question needs to be asked and I think it's really important.

I think that a lot of what we've seen has made, we've been able to make some progress. I mentioned in my remarks that, you know, land leases and having, you know, know, public land available, Instead of spending 10 or 15 million an acre, we have, you know, low cost land leases.

And I think that really makes a difference. I do think that again, the entitlement pathway that we used to pursue cost millions or more dollars and that is now very, very efficient.

So I think we've started attacking all of the cost, the cost of affordable housing and trying to do what we can and with all of the support of all the laws and all of that is very, very help.

You know, we are incentive not just because of the programs, but just because it's easier if it costs less money. We don't need as many capital sources, it's just easier if it costs less money. So we have an incentive to bring the cost down. But there are certain things that we don't control.

Cost of capital, the cost of construction. I mean, we would love to say we would like to build that or buy that lumber for less money because it's affordable housing. But the cost of lumber is the cost of lumber and we're starting to feel tariffs and everything else just the same way.

You'll hear probably more of this from the market rate panel as well. I think that, you know, there are things to explore. When I mentioned the cost of capital, perhaps there's an interest rate write down.

There's a program that exists in another state where they have, they use their state credits to write down the interest rate on permanent loans. Federal Home Loan bank used to have a program that did that. So that's a possibility. There are, you know, perhaps your.

I don't know if this is a good idea or not, but I'll say it out loud. You know, maybe you're standing up more modular factories. The more modular factories there are, the more competition, the more easily accessible those mods are.

And maybe that's going to result in more adoption and more use of the modular factories and modular approach. I just think if we continue thinking about ways to bring the cost down, maybe we'll make some progress.

But it's harder than it seems because most of what's in the cost of affordable housing is made up of things that we just can't control.

I'm going to hand it back over to you, but I appreciate that and I do think that we should put this into context. While we're cutting 44% of Section 8 housing, our Federal Government just put $9 billion into common stock of Intel. Right. We firmly believe in throwing billions of dollars into corporate welfare for various reasons.

And I'm not saying that's necessarily a bad thing or a good thing, but. But all those things that you just mentioned, whether it be artificially keeping the costs of lumber down. And we could do that, we could just buy. The government could just spend money on that.

The government could buy the land and just give it to you for a dollar. We could do a lot of this stuff. And our government has done all this stuff in different spaces. We haven't done enough of it in housing.

So I appreciate that feedback and those ideas because I think those are the types of ideas that I know plenty of people on this are very interested in. And I look forward to exploring with that with you. Thank you, Madam Chair.

Thank you. I know we're heading in, we have another panel, but I think just to recap this conversation, you know, your testimony was very helpful and I think in trying to steer where we're going to go and what our vision here is that we try to hone into specific areas.

As my colleague stated, we, we have to solve for that X of where is the money going to come from and how are we going to make it more affordable.

And my colleague Sharon Quirk-Silva, you know, I think the ADU space is a space in the financing area because we have heard it as legislators from the banking community, an interest out there of how we leverage public and private funds to streamline that process that can, as we saw at Cal FHA, how many applications came through and there was funding for that.

So I think there's low hanging fruit goals and then the high hanging fruit, but being thoughtful and strategic of how we can articulate and put a proposal together that we can execute. And in the Housing Committee, I know we talked about, you know, over the last few years there have been over 100 housing bills that have happened.

Which of those bills are working and which ones are not working so that we're not duplicating or creating similar type.

I think there needs to be an area of analysis in that as well and an investment in that because we can't keep running bills if we're not understanding what the ones on the books are doing and if they're being impactful and effective.

So I think and I think another space that I would like this group to continue is the redevelopment 2.0. I know the R word scares some people, but I don't know what else to call it other than a 2.0 something.

But I do think we need to rethink that to the overall big picture that many of us are talking about is an overall statewide housing bond. That there isn't going to be pallet for a bond for people when affordability right now, you know, people aren't seeing the benefit because of other bonds that have happened.

And so we have to have some short term wins to garner that support to passing a bond in the State of California is my humble opinion. And I don't think rolling out with a bond throwing everything that we all have our wish list of would pass in this moment. Given that we are in crisis mode.

I think we, we need to be very deliberate in what we pick to show that we made a change or an impact in communities. And I really firmly believe that the ADU path because we can pick up so many partners and bring so many units online because of streamlined permitting that has happened.

Another space that's very complicated as well is rehab loans that have just disappeared. There's so many empty nesters that can downsize that they have nowhere to move. It's not affordable for them to leave their big home to freed up for single family.

So that's another space that also needs policy analysis on, on how we can free up those home and the financing and then on the construction side of of these public private partnerships of making the land to your point that where is the master plan of where all the state parcels are that we could put out to developers?

Where is the master plan in surplus property with school districts and then creating the financing. So I think being strategic, if we are able through this Committee to at least create a roadmap of, you know, figuring out where the surplus property is.

Because we know it's not half the battle in the financing, but assets that we already own and better leverage to finance will help those performers as we all know instead of acquiring land.

And then second to that is also those of us who own land already on the single family side that can leverage and maximize density there with ADUs. How can we help those individuals finance? And as my colleague stated, it does not make sense. Many people are beneficiaries to very low interest rates right now.

To tap into your equity is leaving that low interest loan to finance.

And so we need a standalone ADU loan that allows people to just finance it and bring the inventory and figure this out legally how, you know, banks can be in a space that they feel comfortable not being in second position that you know, promissory note and figuring this out.

So I think there's a lot of dialogue that we can have in those spaces of figuring out existing bills, financing and leveraging our assets that the state has, because that's what we have control of and figuring out how we match up that surplus land to developers and then to financing to overall the big picture of a statewide bond.

But I think this Committee should be talking about redevelopment and what that looks like or a version of it, a 2.0 something because like I said, people's ears turn off when we start saying redevelopment.

On that note, I want to ask my colleagues on the panel if you guys have any other follow up or I'd like to depart with just next steps even for you guys. Does that sound if any of the things that we all threw out, where should we go next?

But because I really do feel that there needs to be an ongoing working group, whether in the public forum or a subgroup of just us coming back in spaces to talk about in order if we're ambitious enough to have a proposal to our colleagues by January, we need to meet regularly to have a direction.

So I'm looking to my Committee Members on and the group as well, what we all said. Where would you all like to lean into?

Well, I just want to really appreciate the conversation. I think there's some existing body of work on EDUS that we could build upon. So we would love to bring that back for further exploration.

I do agree that there's been a lot of legislative activity that's been incredibly fruitful and I love the idea of really understanding which ones have been the most impactful and you know, would love to continue to be involved with that.

And I think you have the right folks, you know, to think through that, especially you know, stakeholders out in the field really building the projects, you know. And I do think, you know, state priority is really to unlock land where possible.

And so you know, we can share what we've done so far to do that and kind of make those available and public. But I think there's more to do on the program side, so look forward to speaking about that.

Great.

I agree. I think the co chair is very well aware of CALHFA's activities having been a part of our board for many years. So we would love to continue the conversation Obviously in land use and how we can, especially with, you know, we brought up schools and education. CALHFA has been considering looking at that.

As I stated before, we are looking to diversify the products we're offering in the space and connecting with the development community kind of from a design thinking. Human centered design approach. So we can definitely continue to update on the progress as we design and deploy more products into the multifamily space as well.

And ADU we did, we did have a program, we helped about 2,500 homeowners with our grant program. But I think that the conversation needs to be bigger than a grant program. It really needs to be looking at financing.

And I think bringing the private banking side is super critical as well.

I think in terms of reducing costs. That's going to be great and it will help market rate as well. You know, we have a housing crisis at multiple income levels, not just low income levels. And if we could reduce the cost of building, even market rate, we can reach lower income levels that way versus needing public subsidies.

So I think that conversation is really much needed. And in terms of the kind of redevelopment 2.0, there's been a number of bills the last few years to try to revive this idea of redevelopment. A lot of them have been pretty unsuccessful. So opening up a conversation of how

we can learn from those, learn from those bills and from those financing districts and make something that could really work sounds like a great idea.

And I think another piece that's really integral to this is our business community, the workforce that, you know, I think we have different partners arriving now, corporations that build big commercial spaces and have a workforce commuting two hours away.

And so I think exploring that space in addition to the surplus land of the state might have and working with our business community in the State of California that have a vested interest. So I think we should add that as well as future dialogue. Anything else? Thank you so much. Don't leave yet because we have public comments.

So in case anyone. I'm going to close out our discussion and bring up, you know, anybody from the community that would wish to comment on this segment of our discussion.

Good afternoon. Marina Espinosa here with the California Housing Consortium. Really appreciate the discussion here today and also appreciate the funding allocated to affordable housing programs in the budget this year. As the panelists noted, recent changes to federal law will make it possible to leverage additional resources to produce more housing.

However, to leverage all of the new federal resources available, it's critical that a housing bond be passed to provide an ongoing funding source that will be available over multiple years. And we're working with our partners on two affordable housing bond measures this year which are currently in the Senate.

And we hope that those measures will make it to the governor's desk. I also want to note that we have been tracking the governor's reorganization plan closely and we're excited about having a new housing, sorry, a new cabinet level agency secretary to oversee housing.

We also appreciate the fact that TCAC and SIDLAC are not captured by the plan. Those committees function extremely well under the state Treasurer's office. Thank you.

Good afternoon. Natalie Spivak with Housing California. We're a statewide nonprofit advocacy organization focused on producing affordable housing and ending homelessness. Really want to appreciate the Select Committee for your hard work on these issues and all of the fabulous panelists that are here today.

You've already heard a lot about the scale of the need for affordable for affordable housing. So I just want to focus on two immediate opportunities to grow and defend the state's investments in affordable housing, particularly with the new opportunities to leverage federal funds. First, as Marina Espinosa mentioned, is the Affordable Housing Bond.

The bond could help produce 40,000 new units and critically preserve 5,500 affordable units. I want to emphasize how important the preservation side of the equation is. We're at risk of losing about as many affordable units as we are building. So we really need to be thinking about both sides of the equation.

The second immediate opportunity is maintaining the existing funding for the Affordable Housing and Sustainable Communities program which is currently at risk as the Legislature and Governor revisit the Cap and Trade program. We don't talk about that program as much in these halls, but I think that's actually for good reason.

We get a continuous 20% appropriation from GGRF every year. And so we don't need to rehash the same battles here every year like we do with the state LIHTC and MHP programs. And then finally we've talked a lot about efficiency.

We do need to fund and we also need to make sure that we're using our resources as efficiently as possible. We have been involved in the conversations about the new agency or CHA, and we will continue to be and look forward to engaging on those topics in the future. Thank you.

Good afternoon co chairs and members. My name is Paul Schaefer. I am the Public Policy manager with the California Council for Affordable Housing. We represent the full gambit of the affordable housing development process from the lenders and tax indicators to the developers and the long term property managers.

I just want to start by thanking this body for taking up such an important topic, especially with the focus on finance. I think that part of the conversation is left out. So I think this is very important. As we continue, I would just like to extend our organization's expertise as technical questions may arise.

We would like to offer any help that we can and we appreciate the ongoing conversations. Thank you so much.

Good afternoon, Tia Boatman Patterson. I'm the Executive Director, President and CEO of the California Community Reinvestment Corporation. We finance or provide lending, permanent lending, for multifamily affordable housing, primarily 9% and 4% deals. I'm also the former Executive Director of the California Housing Finance Agency and I'm a recovering redevelopment attorney.

So I have 30 years of housing finance experience. And so I want to be really clear when we talk about finance. Finance is going out and getting money from the private sector, bringing it to the table and being able to repay your debt. Funding is subsidy.

Now what the State of California really needs to focus on is the housing funding programs that come into the capital stack when you're talking about overall financing. Right now the backbone for multifamily affordable housing in the State of California are the tax credits. They're one of the best tax credit allocators in the nation.

And I can say that because I used to be the President of the National Council of State Housing Agency and California is one of the best. All states except for California and Massachusetts have their tax credit allocator also fund the gap. So you have a one stop shop.

The problem in California is that the funding of housing programs is coming outside of the financing system. You have a housing finance agency which finances. They have to take on debt and it has to be repaid. What does the California State of California want its role to be and funding housing programs?

Do you want to be on the front end and do pre development? Do you want to do acquisition? Do you want to come in as gap financing? You cannot fix the housing finance system until you determine what your role is going to be.

Because right now all of the State of California's housing funding programs are for the perm piece on the back end. But they come in first. That is backwards.

You can't come in and first and do a whole competitive application and bring in your front end Monday and then say we're not going to fund the project until three years and then we're going to dictate that real estate transaction. That is the tail wagging the dog.

Instead of the dog wagging the tail, you have to lead the with the tax credits. And then the funding has to work with the tax credits, not the other way around. And California has gotten it completely backwards. The reason redevelopment worked is because redevelopment funding came in in various ways.

You could bring it in for homeownership, you could bring it in for gap financing, you could bring it in for pre development, you could bring it in to leverage private capital. Right now the State of California is putting in their money as if it's leveraging private capital and it's doing just the opposite.

So you really must think about your housing programs, which you have 50, 11 million of them with all different rules and how that is going to play with the system, not change the system to fit those programs. Because we have been talking about 40 years about how we're going to create a one stop shop.

You will never create a one stop shop until you flip the script and think about funding housing programs differently and understanding what you want the role of the State of California can be because understand tax credits and bonds can go from everything from homelessness to entry level homeownership.

And we can't just think about production, which is what we've done for the last eight years. We must talk about preservation. So balancing what those needs are going to be and understanding what your role is going to be is going to be critical in anything you do to talk about housing finance. Just my two cents.

Good afternoon chair and members. Karen Stout here speaking on behalf of a couple of my clients, most notably California YIMBY as well as Unidos US. Just wanted to echo everybody else's comments. I really appreciate you taking the time to create this Committee.

I think it's really important that we focus on housing because it is the critical issue that comes up. It's the through line. In all of the polling I see in my clients through line and all of the people that you speak to on a regular basis.

Housing is the most important issue right now and I really appreciate your time. I just wanted to kind of echo as well the importance of tax credits.

I think it was great to hear people talk about Li Tech and something that I wanted to note is that it is also critical that we think about ownership when we talk about these low income housing tax credits.

We had a Bill this year, AB595, which was unfortunately held in the Appropriations Committee that would have extended those LIHTC credits to homeownership opportunities. This is particularly critical because as everybody here knows, that is a critical tool to building generational wealth. It helps people build that throughout their communities.

It helps Especially for low income communities and communities of color. Unity of SUS in particular focuses on the Hispanic community and ownership is a critical piece of their advocacy. I also wanted to say that it's important that we expand construction funds for ownership opportunities as well. Down payment assistance is important.

We agree with that as well, but it also doesn't create opportunities for construction funds. So we want to make sure that we're bringing ownership units online as well. Also, just wanted to thank everybody for bringing up the importance of continuing to invest in ADUs.

We have seen that be one of the most effective tools for bringing new units online. And so we just wanted to agree with everyone else's comments about the need to streamline those ADU construction processes as well as find new ways for financing. Thank you for your time.

Thank you. And with that, just want to thank our panelists. This is one of many meetings I hope to have with you all. No, no, they're done. Oh, I'm switching. So thank you all for coming and look forward to connecting with you all offline and with my staff. So thank you for coming today.

We are now going to switch to our second panel and we're going to be discussing market rate and mixed income project financing. And we have Ben Metcalf, the managing Director for the Turner center with the Housing Innovation in UC Berkeley, also someone I served with many moons ago.

It feels like so, so good to see and whenever you're ready.

Great. Good afternoon, Chairwoman, Committee Members, again, my name is Ben Metcalf. I'm with the Turner center at UC Berkeley research institution focused on housing policy.

And I'm going to sort of help with the pivot here as we talk more generally about the housing markets and think about what else the state can be doing to help spur the construction of more housing to meet the state's needs. There's no clicker. I just say next slide. Is that right? Yes, next slide.

So while affordable housing is critically important for those who are able to access it deed restricted affordable units have represented probably only about 20% of the State of California's housing production over the last several years. So when we talk about the overall housing goal, what we're really talking about is market rate housing production.

And it's worth noting, just as you look at the history here, we've been in a systemic decline of market rate housing over the last half century or so. That's due to a number of different factors.

And when we think about the challenge of affordability writ large, obviously part of the reason why we've been needing to build so many deed restricted, subsidized affordable housing is because of a failure of the market to generate enough housing to meet the needs of the people who are in the middle workforce housing. Next slide, please.

In fact, today California is far, far behind many other places around the country in terms of its ability to sort of unlock housing demand. This is surprising. This chart just shows California at about number 39 out of 50 states in terms of its housing production on a per capita basis. And this should be surprising, right?

In the sense that California does have a vibrant economy. It is a place with a wonderful climate and hospitable people and generally a fair amount of demand for people to move in. And yet what we see instead is very significant domestic net outward migration because of an inability to find the homes at an affordable price.

So why is this? Next slide. So I want to do a little bit of a primer for you on sort of how to think about this problem. Because in the affordable housing space, you can think about efficiency and subsidy on the market rate side. Typically we're not coming at this from a subsidy perspective.

So the answer doesn't lend itself to hey, put some money on a bond or find money from the General Fund. It's really a question of what are the ways in which we've made it difficult for builders to build and in particular for builders to build the kinds of housing that we probably most want to see.

Entry level, perhaps infill, perhaps more accessible and appropriately located in our more climate sensitive areas. So what I'm going to do for a few minutes is sort of run you through a little exercise here that asks a few questions. What basically coming down to what is it that determines whether a builder will choose to build?

As was mentioned earlier in this afternoon session, the state has actually made a fair amount of progress on upzoning. There are many cities that have built favorable development landscapes. This Legislature enacted a significant CEQA reform that's provided quite a bit more certainty for builders.

And so the question becomes, well, what if we succeed in perfecting sort of the regulatory zoning envelope here and builders aren't building what's going on and what can we do about that next slide?

So I want you to imagine with me for a second a delightful place called Turner Terrace, which is a prototypical market rate for rent building with 100 units that a developer wants to build on an acre of land that they have access to and is running their model.

They're running their performance, they're trying to see if they can bring the capital in to make it happen. What's going through their head. Next slide. So actually we can go to the next slide. Thank you.

So in this case, a developer has a set of costs they've come up with working with a contractor and have determined that they have a project that they want to build. And the inputs that go into that are, broadly speaking, hard costs.

So literally, the cost to hire people to get out there and build the materials that go with it, the soft costs, which are architecture and engineering, legal fees, permit costs and the like, as well as land costs.

And if you just toggle forward a couple slides here, you can see the sort of components that we program for our model, with blue at the base being land, yellow being the hard cost, and then the light blue at the top being the soft cost. So this isn't. I'm not offering here.

This particular $80.8- .8 million project is not how every project will look like. But based on a number of surveys that we've done with developers, it's fairly representative of what a project like this might look like. Next slide.

So I think one piece of context here is just to understand that costs have been rising, and so we are in the middle today of a increase of cost that has been going year over year at a rate well in excess of inflation. That's true for both labor costs and it's true for material costs.

I apologize for those in the back here, but this gives a little bit of a sense of the degree of which we've been seeing these exceptional increases in real terms year over year. Next slide.

So when the developer now knows what their costs are, they have a sketch, they have a vision, they have a pro forma, essentially, they now need to go out and find the capital to build this. Most developers themselves do not fully finance. Very few fully finance the projects themselves. Instead, they're really pulling from two sources of capital.

The first place they go to is a bank, which offers them conventional financing and their number one job as developers, typically to maximize that out. Bank money, debt money, hard money is actually often the best kind of capital you can get. It's fairly low cost.

It's going to be cheaper than whatever you can get on the equity side.

And so you start by really going to the bank and saying, okay, given what I'm showing on my cash flow, given what my total value is, given the standard risks that you see in the marketplace, how much of this project can you finance as debt? And the banks will basically underwrite that and give a number back.

Sometimes the upward constraint has to do with the cash flow on the back end. Sometimes the constraint has to do with the total value. A bank never is going to want to fund the whole thing. They always want to be simply a share of the total.

In this case, on our project, we found that a bank, these kinds of deals would probably want to come in at about 55% of the total valuation. So that gives you 44.0 in debt. That's sort of somewhat, perhaps the easy part, the hard part then becomes, okay, now I need to raise the rest.

That money is coming from equity investors who are going to ask for much higher return thresholds because it is their money that is going to be at risk. So they are the money that is going to take the hit if this project doesn't perform or if it can't be built. Next slide.

So who are these investors that might invest in projects? Well, for smaller deals, it's often, you know, friends and family. It's, you know, mom and pop folks are going to the folks that they know.

Larger developers, however, are playing in a pretty sophisticated institutional marketplace with private equity companies that are doing investments across a whole range of different categories. They may have an ARM that does commercial or industrial logistics, an arm that does residential. Pension funds have historically been major investors into housing, as have insurance companies. Next slide.

These investors have capital that they are making a choice to invest, and they have choices. They could choose to invest it into a logistics facility, they could choose to put it into Treasuries, they could choose to deploy it in Arizona.

And so typically, investors will have a certain return threshold that they're getting on these kinds of multifamily assets. That return hurdle rate is often expressed as a sort of a return on crate return on cost, which keys off of the assumed capitalization rates for that project. Next slide.

So for our deal, we are assuming that what is going to motivate an investor to invest on a new project is going to be that they're getting a better return than what they'll get from simply buying an existing asset.

And the rule of thumb that we use here for our model is it has to be about 1 percentage point higher. Next slide.

So in other words, if an investor could simply buy an existing operating multifamily property today and get a pretty safe 5% return, if they're going to want to invest into a new project with all the risks and uncertainties that come with entitlements of permits and construction, they're going to demand a higher return and look for a cap rate that's closer to 6%.

Next slide. So when we actually run the math on our prototypical development in the East Bay, 120 units, a little bit of retail, some parking, we actually find that a typical investor in today's market has a very hard time making it.

In fact, our prototypical pro forma actually came up as a little circle with a line through it. It doesn't pencil.

We basically showed that given what we could reasonably expect in rents relative to costs, a typical project today in a typical market could only return 4.7 or 4.8% and not the minimum rate that investor would be looking for.

So that's a problem because it means the capital won't flow to a deal even when there's a site available, even when the zoning permits it. And so it begins to beg this question of well, what do we do and what can the government do?

The government can't state government can't directly intervene to change the return thresholds that investment capital is looking for. Next slide.

So, you know, one- one question is an obvious question to start from. Might just be, well, you know, can't the investor, can't the developer just charge more in rent? Well, the problem there is that typically a developer is starting from the position of trying to optimize their rent levels.

And so they are basically going to rent their units for whatever the market will bear. They're going to put those units up and they're going to make their best guesses what they're going to get, and that's going to be what the investors are based on.

And to price your unit higher than the market would be a pointless exercise. It would result in the units being held vacant and the project losing money. So you can see that the rent you can rent units for very much determines what the return is that you're going to get.

And so in our case, we're assuming a $3,500 a month rent. And hypothetically, if you would get a higher rent. So if you go forward one more slide, it could actually make all the difference. But in today's environment, a developer investor has no particular reason to assume that the rents are going to be any hot.

They run their models, and if the rents are what the rents are on a forward basis, they're going to have to go with what they can pencil. So if $3,500 per month is the unit, then is the likely outcome. Then the question becomes what are the other policy levers that government might have. Next slide.

So what we've done in some of our exercises here is basically just to take this prototypical pro forma and look at policy levers that state or local policymakers reasonably control to think about what it might take to help an investor get the kind of returns that they would need to make these projects get off the ground.

So here we've given you four examples of this. Reducing impact fees, reducing required parking, allowing for higher density, or finding ways to facilitate reduced hard costs. What you can see in our very simplified thing here is that there isn't often any sort of simple bullet.

And in fact, usually to get these kinds of projects off the ground, into the ground, policymakers probably need to be looking at multiple different interventions to try and sort of boost the cost that you can get in these projects. So in our simplified model here, it actually takes all four of these interventions.

Reducing fees by 10,000, reducing parking fees to 0.25 spaces increase, allowing the density to go up by 30%, and then finding a way to facilitate a reduction cost by 10% to get the yields that are required. Next slide. So just in conclusion, I think there are many, many opportunities that stand here.

So number one obviously is trying to create that sort of zoned zoning and certainty in the development process that makes it easier for capital and investors to build.

So having buy right or ministerial approvals allowing for denser development that can get the kind of economies of scales that are looking for, that's sort of the necessary but not sufficient often in our markets in coastal California. The next question is how can we actually lower the cost?

So are there opportunities, particularly for, let's say entry level housing, for mixed income housing, for accessible attainable homeownership, to look at ways to reduce impact fees which can be quite high, or to provide property tax or welfare exemption tax benefits to builders of this housing?

Next, I think a question very reasonably that this committee should be, should be asking is are there opportunities also to lower the cost of capital for builders?

And in fact there are and have been a number of efforts to provide capital to market rate builders, sometimes in exchange for setting aside a number of units for moderate or lower income housing. This capital can come as hard money that can displace some of what would be required to be given by equity providers.

And then lastly, although issues like insurance, labor availability, the lack of good manufacturing and automated off site facilities can feel like they're outside of the control of the state. In fact, all of these are things which the state has tremendous impact on. They cut across and beyond housing, but they're things that require action.

So providing better insurance plans, helping with training programs for folks coming out of the community college system, looking at ways to invest into manufacturing and off site factories and increase opportunities for automation are things that the state is already experimenting in and are clearly opportunities that could have a profound impact for overall boosting the supply of housing in California.

Thank you.

All right. Good afternoon. My name is Thomas Wilson, CEO of City Connect Partners. We are a market rate housing developer. Appreciate the opportunity to contribute to today's informal hearing on housing is finance. I'm going to share some real life experience on what we deal with on a day to day basis on our infill properties.

City Connect Partners is a missing middle developer. Our focus is on infill properties across California. We range from half acre sites up to 15 to 20 acre communities. Unlike publicly traded national builders, our financing is very different. We rely on local banks, private equity, project level partnership rather than corporate balance sheets, meaning timing, timelines, predictability and entitlement

certainty is the most critical to our delivering of homes. We believe we're a vital piece of California's housing solution, producing the types of projects that integrate directly into existing neighborhoods while meeting community band with the ability to scale up to larger communities when opportunities align. The financing reality of private development is it's capital intensive.

Most of our projects require land loans backed by construction loans with equity partners and other layers of financing. Financing is not static. Capital is going to flow where risk and return are balanced. Lenders, equity partners demand clarity such as timeline, clear rules and enforceable approvals.

When the risk is too high because of delays, legal exposure or regulatory uncertainty, capital withdraws and the projects are going to stall. Taking you through one of our typical projects, City Connect is going to go identify the project. We're going to run numerous financial project performas and then we're going to move into the land acquisition phase.

With the land acquisition phase, there's going to be some sort of land loan, usually from a local bank, and that's going to cover 50 to 60% of the purchase. The other remaining equity is either going to be self funded from our development company or from equity partners. We then move on to the entitlement phase.

During the entitlement process, we are carrying the cost of the original land loan. We're acquiring costs from taxes, insurance, the holding and the payment of those loans. And then we are tasked with making sure that we are able to cover the full entitlement package.

Architects, engineers and all the city fees to get that project ready to put a shovel on the ground. Once entitled, we now transition to a construction loan, typically 65 or 75% of the total cost of the project.

We now need to bring in remaining equity injection, usually from private equity, and that's going to require a much higher return. Finally, we get to the exit. So now we need to make sure the for sale projects are relying on home buyers who can qualify for mortgages at current rates.

Rental projects that we've stabilized and are cash flowing to meet our lender requirements. This is a sophisticated layer capital structure, meaning that at every stage financing is conditional. Bank and equity partners are not going to commit unless timelines and approvals are predictable. Delays add uncertainty and that means it threatens the equity stack at any level.

Today's talk cost of capital, land and construction loans are running in the 8 and a half to 9 and a half percent. With our equity partners demanding or expecting a 15 to 18% IRR for sale requires buyers who can afford a 6% to 7% mortgage rate.

When project delays occur, many times the equity stack cannot afford additional pressure such as delays and that can cause the stack to crumble or the project to fail. For every additional month of delays adds carrying costs, interest, inflation risk. A two year entitlement process can double financing costs compared to a one year process.

Projects that look feasible at the start can become infeasible by the time approvals are secured. This is not theory. This is what we are dealing with every day in the market. At its core, the main subject of my remarks today is time. Financing is elastic to many risks, but it is unforgiving when it comes to time.

Every week, every month, the delay compounds the cost. It erodes the feasibility of our projects. Time alone, not interest rate, not land rate values is often the factor that determines whether project lives or dies. For developers like us who operate on infill lots with tighter margin, time is a make or break element.

With the creation of new laws such as SB 1123, AB 1893 provisions in SB 130 budget trailer bill, US developers finally have a sense of optimism wind at our back that the state housing policy is beginning to align with the realities of financing and entitlement of market rate units.

These come on top of other important statutes such as SB 330, SB 35 density bonus, all intended to accelerate housing production and in many cases providing real tools for us to move the project forward.

The challenge is that each statute also comes with carve outs, exceptions and procedural gaps that leave projects vulnerable, causing delays and driving up the cost for developers.

This means we spend much time researching, becoming expert on these new laws and then we manage the risk and defend the entitlements while we are trying to design and actually build the communities. Predictability and clarity, not just new programs are what unlock financing. Capital can adapt to most any rule but will not commit when law is uncertain.

When carve outs and loopholes leave projects exposed to litigation. For market rate infill projects and most market rate builders, CEQA still remains the single largest driver of financial hesitation. Even with recent legislative reforms, the threat of litigation procedural delays tied to CEQA continues to prevent lenders from committing capital with certainty.

For both banks and equity partners, CEQA litigation is the number one concern when evaluating whether to invest or not. I'm going to do a case study of a project that we have actively entitled. Right now we are we have a project in Saratoga we are working through and we have been 30 months in this project.

We are working through the entitlements on the large project. We are currently carrying both a substantial land loan and significant equity investment at the current proposal the pro the project is 12 acres and is 231 medium density homes, including 40 affordable units designed at a three story product at 35ft.

When SB 130 was being considered, we anticipated this project would qualify for the new CEQA exemption. That protection would have provided the certainty our financing partners require. However, unfortunately in the final language, a carve out excluded the builders remedy project over five acres. As a result, this project is now subject to CEQA challenges.