Right Column

Permanent Source Updates - October 2011

Why we need a Permanent Source now, more than ever: The economic downturn has decimated the construction industry and exacerbated California shortage of affordable housing. This has left financially strapped families with too few options and paying more than half their incomes for housing, not consumer goods.     

The Department of Housing and Community Development and the California Housing Finance Agency have renewed the effort to help ensure California families have a safe and stable place to call home and create an ongoing way to revitalize the housing market and kick-start the economy. The concept is to fund affordable housing on a pay as you go basis – no bonds, through at Permanent Funding Source.

How will we get there? HCD and CalHFA are working with stakeholders to develop the best options for establishing a sustainable housing trust. HCD has already updated research on more than 20 potential funding sources suggested by a broad group of stakeholders including the business, education, labor, environmental, local government and housing communities. These stakeholder groups have reached a consensus that:  

• Multiple fund sources would provide more stable support for housing over time than a single source
• Funding should be administered by both the State and local governments
• The State should not reinvent the wheel or add new bureaucracy.  Existing, proven, and streamlined state and local program delivery systems should be used. These delivery systems should be regularly reevaluated and modified when needed to ensure they remain effective and efficient over time.

We will continue to craft an affordable housing trust that will:

• Ensure sufficient funding to make a meaningful impact on housing, with priority for rental housing,
• Maintain a spending cap and reserves to allow for consistency of expenditures over time and
• Include accountability and mandatory review provisions based on measured outcomes.

What are the Annual Economic Impacts?  Every $1 Billion Invested in Permanent Source:

Annual Revenue Benefits:

Without a permanent, ongoing source of funding for housing affordable to the State’s workforce and neediest, the State and its local public and private housing development partners will not continue increasing the supply of housing after existing housing bond resources are depleted. HCD estimates that there are about $1 billion in shovel-ready projects that were not funded in the most recent rounds of HCD funding.

The lack of sufficient housing impedes economic growth and development by making it difficult for California employers to attract and retain employees.  While current credit and foreclosure crisis has resulted in reduced home prices in some areas, it has slowed actual new production and exacerbated the mismatch between the ever increasing number of households that need housing they can afford and the supply.  

Failure to sustain funding for development of affordable housing over the long term also reduces the economic development benefits and jobs created by this housing production, at a time when the State’s economy needs this stimulus.  This is particularly critical since the overall California homebuilding industry has declined from 960,000 jobs to 163,000 jobs (a decrease of 797,000 jobs) in the past several years, comprising over a third of California’s current record high unemployment.  New home construction activity alone has declined from 487,000 jobs in 2005 to 77,000 in 2009-10.

(* Based on June 2009 research from the National Association of Homebuilders; all other figures based on July 2010 study by Center for Housing Policy, Building California’s Future)