‘It’s A Shame’: California Squandered $2.7 Billion For Affordable Housing, Audit Says

California’s lack of affordable housing is severe and well-documented. 

One recent estimate says the state needs 1.4 million more affordable rental homes to ease the burden on low-income families.

But the state’s convoluted process for financing that housing — and the effect it can have in gumming up development — is less apparent. 

A report this week by the California State Auditor shined a spotlight on that process, describing it as “ineffective,” “cumbersome” and responsible for wasting $2.7 billion in bond resources that could have spurred affordable housing construction. 

“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 Howell wrote to Gov. Gavin Newsom and the Legislature in the audit’s public letter.

Squandering that money has real-world effects. 

“To me, that’s outrageous,” Dana Chavez, 49, said of the audit’s findings. 

Chavez is formerly homeless and facing eviction at the Hawthorn Suites in Sacramento, where she and her girlfriend, Lori Stanberry, 44, have lived since September.

“There are too many people out here [who are homeless], not just in Sacramento but in other cities, too,” she said.

Stanberry added, “I’m not surprised, but it’s a shame.”

Howell added in the report: 

“Four key state agencies contribute to the State’s basic housing efforts, but there is no sound, well-coordinated strategy or plan to most effectively use their financial resources to support affordable housing.”  

This lack of a comprehensive plan allowed one agency “to mismanage and ultimately lose $2.7 billion in bond resources” for affordable housing, the report added. It cited the Debt Limit Allocation Committee, which it says lost the money between 2015 and 2017, failed to publicly disclose the loss and struggled to explain it. 

The committee is part of the state Treasurer’s Office. It distributes tax-exempt federal bond authority to help developers build affordable homes and other projects that have a public benefit.

The report made these recommendations: 

• Require the state’s Department of Housing and Community Development to prepare an annual report identifying all financial resources for the development of affordable housing.
• Create consistent requirements for awarding affordable housing funding for multifamily projects and remove administrative barriers. 
• Eliminate the Debt Limit Allocation Committee.

‘The Status Quo Is Not Acceptable’

Advocates and affordable housing policy experts said they generally agreed with the audit’s findings and recommendations. 

“It should lead to a renewed focus by the public and legislators to say the status quo is not acceptable,” said Matt Schwartz, president of the nonprofit California Housing Partnership, which advocates for and provides technical assistance to create affordable housing. 

Schwartz said some progress is underway with Assembly Bill 434, which Gov. Gavin Newsom signed in September after it gained unanimous support in the Legislature.

The law streamlines the application process for affordable housing developers, allowing them to submit applications reviewed simultaneously by all agencies rather than requiring them to apply to several separate ones. 

He noted, however, the law won’t go into effect until 2022.

Sean Spear is executive director with Community Housing Works, a San Diego-based nonprofit that develops and operates affordable apartment communities across the state. He agreed the audit was “on the right track” and that greater coordination is needed among state agencies. 

But Spear, who served as executive director of the Debt Limit Allocation Committee from 2009 to 2015, said it’s not fair to say the $2.7 billion cited in the audit was “lost.” Instead, he said the state’s authority to use federal tax exempt bonds “expired,” largely because the state received fewer affordable housing applications and the clock ran out on the ability to use the bond funds. 

“No state in the nation used all its authority,” he added. 

‘You Need A Gameplan’

The audit reported that California must develop 125,000 affordable housing units per year to meet its needs, but averaged just 19,000 units per year from 2015 through 2019. 

David Zisser is associate director at Housing California, a nonprofit that advocates for affordable housing and homelessness solutions. He said he’s hopeful state lawmakers will make the kind of bold changes needed in 2021 to address the housing crisis. 

Zisser said Housing California and the California Housing Partnership are developing Roadmap HOME 2030, a strategic 10-year statewide affordable housing plan they hope will provide the momentum needed. 

“To win at chess, you need a gameplan. You can’t just shuffle pieces around the board,” Zisser said. But with California’s affordable housing plans, “unfortunately, that’s what we’ve been doing.”