California State Budget Summary: Allocations for Housing and Homelessness

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On June 26, 2019, California Governor Gavin Newsom signed the Fiscal Year 2019-20 State Budget into law. The State’s fiscal year begins July 1st and funding will be available by end of July 2019. The approved budget allocates $2.4 billion to help address homelessness and affordable housing needs, and includes:[1]

  • Short-term planning and infill infrastructure grants;
  • Funding for housing tax credits and moderate‑income housing production;
  • General Fund one‑time funding for homelessness;
  • Funding for permanent supportive housing;
  • Proposals and procedures for innovative development of State property for affordable housing.

1. Short-Term Planning and Infill Infrastructure Grants

The budget allocates $500 million for the Infill Infrastructure Grant Program administered by the Department of Housing and Community Development (HCD). This program provides assistance, available as gap funding to infrastructure improvements required for specific residential or mixed-use infill development. All of the funds are allocated through a competitive process.

  • To be eligible for funding, a Capital Improvement Project[2] must be an integral part of, or necessary for the development of a “Qualifying Infill Project,” which is generally a discrete residential or mixed-use residential project in an urban area seeking to include least 15% affordable units in the project.[3] Eligible activities include new construction, rehabilitation, acquisition, demolition, relocation, and physical improvements.
  • Projects can receive a minimum of $500,000 and up to $5 million for eligible costs.
  • Non-profit or for-profit developers may be applicants, either solely or as a jointly with a local government or public housing authority.
  • Application here: http://hcd.ca.gov/grants-funding/active-funding/iigp.shtml#eligible

2.Funding for Housing Tax Credits and Moderate-Income Housing Production

The budget allocates $500 million in 2020, and up to $500 million in 2021, for new low income housing tax credits. At least $300 million is to be available for new construction projects that pair with the underutilized 4% federal tax credit program, and up to $200 million may be awarded to projects receiving assistance from the California Housing Finance Agency’s Mixed-Income Loan Program, which provides a lower subsidy than traditional state housing programs. The legislation also lifts the annual $75,000 cap on state housing credits previously allowed to be claimed by each individual. Additionally, it permits permanent developers to sell state credits to unrelated investors who are not also buying federal credits.

3. General Fund One-Time Funding for Homelessness

The budget allocates $650 million in one-time funding for emergency shelters, navigation centers or supportive housing. An applicant, which can be a city, county, or “Continuum of Care,”[4] must submit a grant proposal to newly-created The Homeless Aid for Planning and Shelter Program through the Department of Finance. The applicant can partner with developers for these projects. Under the budget, $100 million is available to existing Continuums of Care and $275 million to cities and counties with more than 300,000 people.

  • Application portal pending.

4. Funding for Permanent Supportive Housing

$2 billion is allocated for the development of permanent supportive housing. Eligible applicants are counties, either solely or with a housing development sponsor.

5. Innovative Development of Excess State Property

In January 2019, the Governor issued Executive order N-06-19[5] requiring departments to identify excess state properties for developing affordable housing units. The budget allocates $3.4 million (one-time) and $782,000 (ongoing) to solicit affordable housing developers to build projects that use creative and streamlined approaches to building affordable and mixed-income housing. Affordable housing developers selected through a competitive process will receive low-cost, long-term ground leases of excess state property. As they will not need upfront capital to purchase the land and will not need to wait for local review processes, affordable housing developers will have greater flexibility to use innovative techniques to produce units more quickly and cost-efficiently than a traditional project.

*Felipe Hernández is a summer associate in Sheppard Mullin’s Los Angeles office.

[1] The final budget will be available in July 2019, see http://www.ebudget.ca.gov/. For the most recent description of the budget see League of Cities, “State Budget Sent to Governor Continues Prudent Approach; Trailer Bills to Follow,” (June 14, 2019) (https://www.cacities.org/Top/News/News-Articles/2019/June/State-Budget-Sent-to-Governor-Continues-Prudent-Ap#sthash.mtuUpScl.dpuf).

[2] A Capital Improvement Project is a project that helps maintain or improve a government asset, such as infrastructure.

[3] See HCD, “2016-2017 Guidelines,” Infill Infrastructure Grant Program (IIG) (http://hcd.ca.gov/grants-funding/active-funding/iigp.shtml#eligible).

[4] A Continuum of Case is a system that guides and tracks patients over time through a comprehensive array of health services spanning all levels and intensity of care

[5] See California Department of General Services. “Executive Order N-06-19 Affordable Housing Development: Development of State Owned Property,” (https://www.dgs.ca.gov/RESD/Projects/Page-Content/Projects-List-Folder/Executive-Order-N-06-19-Affordable-Housing-Development).

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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