Capitol Alert

Cities will lose gas tax money if they don’t meet housing goals under Gavin Newsom’s plan

California cities that aren’t making plans to build affordable housing could lose money for roads starting in 2023, if Gov. Gavin Newsom gets his way.

Newsom first announced his intention to link housing goals to road repair money in his January budget proposal. On Monday, the Democratic governor released details about how his plan would redirect funds generated by the state’s recently increased gas tax, sometimes called SB1 money after the 2017 law that increased fuel taxes.

He also described how he wants to spend $1.75 billion to entice communities to build more and set a timeline to accelerate the state’s construction goals.

“Our state’s affordability crisis is undermining the California Dream and the foundations of our economic well-being,” Newsom said in a written statement. “Families should be able to live near where they work. They shouldn’t live in constant fear of eviction or spend their whole paycheck to keep a roof overhead.”

Newsom’s announcement comes as he works with lawmakers to negotiate a budget deal. They face a June deadline to pass a budget for the upcoming fiscal year.

Several Democratic lawmakers have criticized the idea of linking gas tax funds to housing. 

Assemblywoman Cecilia Aguiar-Curry called it “disturbing” during a legislative hearing on the governor’s plan last month.

“Using SB1 funding is not something that I think should be on the table,” the Winters Democrat said.

Assemblyman Jim Cooper said he agreed with Aguiar-Curry and alluded to the campaign Democrats ran last year to keep the gas tax in place as Republicans worked to repeal it through a ballot initiative.

“There were comments made to the voters and promises made and that was a very heavy lift last year,” Cooper, an Elk Grove Democrat, said. “I think the voters do have a certain expectation that those funds be used for what’s promised, and now to change that mid-stream, that’s going to rub a lot of folks wrong.”

Former Gov. Jerry Brown advocated for the gas tax, which aimed to raise about $52 billion for transportation projects over 10 years. Half of the money goes to state projects, and half is intended to be managed by cities and counties.

Newsom has acknowledged his plan is controversial. It’s one of his efforts to put more pressure on cities and counties to build more to ease the state’s housing shortage. 

He sued Huntington Beach in January, arguing the Orange County city isn’t allowing enough housing for low-income people. He’s threatened to also sue other cities that fail to meet their targets.

Newsom’s proposal would direct the California Housing and Community Development to set new, more ambitious housing goals, moving up the timeline for communities to meet short-term housing targets from three years to two.

Newsom’s budget proposal sets aside $250 million to help cities and counties develop plans to reach those goals. Starting in 2021, cities that hit their targets will be eligible for another $500 million in incentive grants.

Newsom’s plan also includes half a billion dollars to increase the state tax credit for affordable housing projects, including up to $200 million for “moderate-income” housing. It would also expand a loan program for mixed-income developments by $500 million.

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Sophia Bollag covers California politics and government. Before joining The Bee, she reported in Sacramento for the Associated Press and the Los Angeles Times. She grew up in California and is a graduate of Northwestern University.
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