Permanent Source Highlights - September 2010

The Department of Housing and Community Development has been working on a plan to bring back the housing market and kick start the economy by funding affordable housing on a pay as you go basis – no bonds. This proposal is known as the Permanent Source.

Over the course of the past three years, the Department conducted 11 stakeholder meetings throughout the state including key stakeholders in the business, education, labor, environmental, local government and housing communities. Several areas of consensus emerged:

  • Multiple fund source would provide more stable support for housing over time than a single source
  • Funding should be administered by both the State and local governments
  • Don’t reinvent the wheel or add new bureaucracy. Existing successful and streamlined state and local program delivery systems should be used.

Based on the Department’s housing needs analysis as well as actual experience regarding the demand for funds and public/private partner capacity, HCD recommends the permanent source(s) establish a $2 billion annual target, although lesser revenue levels would be anticipated in the initial years. This would result in the following housing and economic impacts:

Annual Economic Impact: $2 billion level

Full time jobs during construction

97,734

Ongoing jobs

18,200*

Economic Impacts (direct and Indirect)

$17.5 billion

Homes and Apartments built

46,540


Annual Economic Impact:  $1 Billion Level

Full time jobs during construction

49,539

Ongoing jobs

9,300*

Economic Impacts (direct and Indirect)

$8.9 billion

Homes and Apartments built

23,590


Fiscal Benefits to:

  State County City
At time of Construction:

$10,479

$1,442

$759

Ongoing:

$1,869

$45

$242

The Department researched more than 20 funding sources that had the greatest viability, when combined, to raise the levels of revenue discussed above on an ongoing basis.
Why a Permanent Source(s) is Needed:

  • 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. The lack of sufficient housing impedes economic growth and development by making it difficult for CA 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.
  • The gap between the 220,000 new homes needed each year and those actually constructed has widened. 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)