California lost $2.7 billion it could have spent on affordable housing, audit says
California’s absence of a coordinated plan led to the state mismanaging and losing $2.7 billion that could have gone toward building more affordable housing, according to a report released by the California State Auditor on Tuesday.
The report also found that the state’s process for financing affordable housing can slow development and increase project costs. Meanwhile, state oversight is too weak to ensure cities and counties build their share of affordable housing, the report found.
“California is failing to build enough affordable homes for lower income residents in part because the State lacks an effective approach to planning and financing development of affordable housing at both the state and local levels,” State Auditor Elaine Howle said in her report.
California’s housing cost is among the highest in the nation, and affordable homes are hard to come by. In 523 of 539 cities and counties, at least 20% of lower-income renter households spend half or more of their incomes on housing, according to the report.
Over the past few years, the state has put forth billions of dollars to encourage developers to build affordable housing. In 2018, California voters passed Proposition 1, which authorized $4 billion in bonds for affordable housing.
The audit found that the state needs to add 125,000 affordable housing units annually through 2029 for low-income residents. Yet, California supported the development of only 19,000 affordable housing units each year from 2015 to 2019, according to the audit.
In one case a few years ago, the state’s Debt Limit Allocation Committee tasked with providing tax-exempt bonds for financing affordable housing had set aside $3.5 billion under federal law. But by the federally set deadline of 2017 to use the money for financing affordable housing, only $800 million had been spent, meaning the rest was no longer available for any purpose, according to the audit.
The committee, which is part of the State’s Treasurer’s Office, did not disclose this loss in its meeting minutes. Committee staff struggled to explain why the money was lost, the report said.
In her response to the audit, California Treasurer Fiona Ma noted she took office in 2019, outside of the time frame described in the report. Under the current leadership, the committee now has a policy that would make any leftover fund available for any “highly active issuers.” That entity will have three years to use the money and will be required to update the committee frequently, Ma said.
Ma also said she and her staff has been traveling throughout the state to encourage affordable housing in all corners of California.
The Treasurer’s Office is further reviewing the audit, its spokesman Mike Desio said in an e-mail.
The audit also said counties with the highest demand for affordable housing didn’t get as much tax credit from the state as they need to build low-income homes. And the state doesn’t have a unified data system across agencies to track the funding awarded for housing projects, according to the report.
The report also said four agencies tasked with helping with the state’s housing efforts created their requirements for funding without coordinating with the others.
“The State could thus benefit from having a standard set of requirements, consistent deadlines, and a single application process for its multifamily housing programs, which not only would reduce the likelihood of delays for applicants but also could increase the State’s supply of affordable housing,” the report said.
The audit also urged the state to strengthen its laws to overcome local barriers to those homes. Doing so could include requiring cities and counties to have streamlined review process for affordable housing and creating an appeals board to resolve disputes over development projects, according to the report.
“California now faces an extreme, statewide affordable housing crisis along with local barriers to addressing that crisis, and this necessitates further action,” the report said.
