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California Auditor Slams State for Squandering Housing Funds

  • California's state auditor concluded in a report that "ineffective" approaches at the state and local levels are exacerbating the severe housing shortage

  • Fewer than 750,000 units have been permitted statewide since 2007, per a 2019, accounting for just 40 percent of the projected need.

  • The State's Debt Limit Committee, one of four state agencies in charge of the state’s housing efforts, found that $2.7 billion in bonds expired between 2015 and 2017 due to mismanagement

This week, California’s auditor released a damning assessment of the state’s efforts to tackle its most persistent problem, the housing crisis.

There have long been calls for state and local officials to get a handle on affordable housing woes, and with COVID-19, the nexus between housing and health has never been more clear. It’s well known that California faces a massive shortage of affordable homes. However, the new report found not only that the state has failed to narrow the gap, but that it has mismanaged and even exacerbated the problem.

“California's ongoing affordable housing shortage has contributed to the homelessness crisis and has left more than three million renter households with burdensome housing costs,” the State Auditor Elaine Howle concluded. “This shortage in part stems from the State's ineffective approach to planning and financing development of affordable housing at both the state and local levels.”

Affordable housing and homelessness have been front and center in 2020, from Governor Gavin Newsom’s State of the State, to the dramatic downfall of the landmark SB 50 housing bill and the passage of others, to the debate over desperately needed emergency funds and protections for California’s renters and unsheltered residents during the COVID-19 pandemic.

Yet, against this backdrop of urgent need and a flurry of action, the California Auditor’s report found that “the State does not currently have a sound, well‑coordinated strategy or plan for how to most effectively use its financial resources to support affordable housing.”

In one shocking example, the Debt Limit Committee, one of four state agencies in charge of the state’s housing efforts, let $2.7 billion in bonds, which could have helped finance thousands of affordable housing units and unlocked $1 billion in relevant tax credits, expire between 2015 and 2017.

That’s a bitter pill to swallow given how far behind California is in terms of housing production. Fewer than 750,000 units have been permitted since 2007, per a 2019 report, accounting for just 40 percent of the projected need.

The Department of Housing and Community Development estimated California needs to produce 180,000 housing units annually through 2025 to keep up with demand, which amounts to 70,000 affordable units per year. The Golden State also ranks worst in the nation for renter overcrowding, and while Californians represent 12% of the country’s population, they make up 27% of homeless Americans nationwide.

A lack of data to develop comprehensive plans and unnecessarily inefficient, costly, and complex requirements and review processes for affordable housing projects are core to the state’s failings, according to the auditor. The report also singled out local jurisdictions for failing to prioritize affordable housing and criticized the lack of state enforcement mechanisms and oversight of such efforts. For instance, state laws require localities to adopt housing plans that account for apportioned affordable housing requirements, but as of June 2019, jurisdictions collectively issued building permits for only 11 percent of the affordable units in their plans.

Of course, not all 539 jurisdictions can be painted with the same brush, in terms of both need and effort.

In San Francisco, there’s a lot to contend with. Median asking rent and home prices have risen steeply since the Great Recession. In 2019, the median rental price for a two-bedroom was $4,500 a month, and the median price for a two-bedroom home was $1.45 million (though the coronavirus has caused those numbers to dip, at least temporarily). Individuals making $82,200 are considered low-income in the city, as our families of four making $117,400. San Francisco’s homeless population increased by more than 30 percent between 2017 and 2019 to close to 10,000.

And those rising housing costs are directly linked to the displacement of low-income communities and particularly communities of color. More than 80% of San Francisco's lowest income renter households put at least one-third of their earnings towards housing. That’s also the case for nearly half of the city’s Black and Latino renters. In terms of affordable housing concentration, five neighborhoods—the Tenderloin, SoMa, Western Addition, Bayview Hunters Point, and the Mission—now hold 60% of all the city’s affordable units.

“Gentrification of the city because of all this concentration of wealth and the income inequality has basically shoved the whole middle income workforce out to fend for itself, and so it just adds that much more demand on the affordable housing side, which we're already struggling to keep up with because we have a shortage of land and money,” said Peter Cohen, co-director of the Council of Community Housing Organizations, a San Francisco nonprofit coalition of community-based housing developers and tenant advocates.

“That’s why a lot of housing activists are just as much fighting against displacement and gentrification as they are fighting for more affordable housing,” Cohen added.

However, there have been some promising developments on the affordable housing front in San Francisco. While affordable housing production dipped between 2017 and 2018, San Francisco produced over twice the number of affordable units in 2019 than in 2018, totaling 30% of all housing production for the year, which increased significantly in its own right (the second highest production in the past two decades).

San Francisco also made a couple of important structural changes last year. A new law, the Community Opportunity to Purchase Act, gives qualified nonprofits dibs on certain property sales in an effort to stem tenant displacement and preserve affordable housing in the City, and Proposition E, which voters approved in November 2019, changes the planning code to allow and expedite affordable housing in public and residential zoning districts.

This year, ballot measures tying office space development to affordable housing goals and increasing the transfer tax on expensive real estate transactions, the latter of which is intended to fund emergency rent relief and permanently affordable housing, also passed.

The COVID-19 pandemic presents yet another obstacle to San Francisco tackling affordability, but it has an arsenal of tools and policies at its disposal.

“San Francisco has always been a leader and always been an outlier in the level of performance we can do around affordable housing compared to most of the rest of the state,” Cohen said. “Our needs and the threats of displacement and inequity are also much greater and more acute than they are in much of the rest of the state. So, our problem is much more intense, but our abilities are also much more advanced.”


Image by Jake Buonemani
Image by Rasmus Gundorff Sæderup

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