After years of rising rents, increasingly poorly reached home prices, and a permanent homeless crisis touching every corner of the state, California is finally creating a state agency focused on housing issues.
You may wonder what took so long.
Earlier this year, Gaving Gavin Newsom presented a proposal to split business, consumer services and housing agencies (nasty grab bags of different bureaucratic operations) into two fresh agents.
Congress rejected the plan until July 4th. That wasn’t the case (though some Republicans tried). Work is now beginning to set up California’s first residential agency.
Advocates of bureaucratic remodeling say the move has been postponed for a long time. Research shows that Californians regularly name housing costs and homelessness as one of the state’s biggest concerns. Rapearl, executive director of the California Housing Consortium, advocating for affordable housing developments, said that alone would ensure the creation of a new cabinet-level advisor to the governor.
“A Cabinet-level secretary who sits with other Cabinet secretaries will have that scope to housing…it is taking the agenda to the highest level,” he said.
Like almost every expert interviewed about the new agency for this article, Pearl described the reorganization as a “first step” in bringing much needed order and efficiency to California’s fundraising program for affordable housing.
“Simply moving people and giving them new business cards doesn’t change the system,” he said.
A spokesman for the governor emphasized that the creation of a new housing agency is part of Newsom’s broader efforts to prioritize one of California’s most troublesome issues. Since taking the helm of the state government in 2018, the governor has stepped up pressure on local governments, pushing them to plan more housing, urging them to clear the camps of immobilized Californians, and pushing legislation aimed at strengthening construction.
“This is the first administration to make this a part of our everyday conversation: to put magnifying glass on the issue of homelessness and find ways to effectively address them. These structural and policy changes create generational impacts,” spokesman Tara Gallegos said.
Of the seven cabinet-level bodies, BCSH has always looked like the “everything else” wing of the state government. Affordable housing grants, lenders and urban planning regulators share agency letterheads with everyone on the cannabis and alcohol industry supervision, professional licensees, auto mechanic watchdog, and California horse racing committee.
“We called it the ‘Misfit Toy Island’,” said Claudia Cappio, who ran both California’s housing finance institutions and the Department of Housing and Community Development around the year 2012. “Imagine a staff meeting for all these things… I’ve learned a lot about horse racing.”
Aside from giving housing and homelessness to their own boxes above the Newsom organizational chart, the main selling point of the reorganization was to simplify the state’s affordable housing financing system, Hydra.
Now, the third thing that affordable housing developers apply for loans is the state organizations that go to most grants, and the third one that applies for federal tax credits that builders use to seduce private investors is the fourth of the bonds needed to secure a lot of those credits. This does not include one-off programs for veterans, transportation-oriented developments, and short-term housing for homeless people scattered throughout the state government.
To further complicate the situation, the tax credit and bond financing program (the backbone of funding for affordable housing developments across the country) is not even under the governor’s control. These programs are run by independently elected accounting in the state.
“Many states have essentially home finance institutions that control most of affordable housing funds,” says Sarah Kalinsky, who directs research at the Terner Center for Housing Innovation in Berkeley, California. The California program is split, which is unusual.
Beyond that, “What makes California so unique is the fact that the resources are spread across two different constitutional officers.”
That fragmentation appears to add to the construction costs of California. An analysis from the Terner Center estimates that this spring, additional funding sources will delay projects for an average of four months, adding an additional cost of $20,460 per unit.
Here, affordable home construction is already clearly expensive. Building publicly funded projects in California costs more than 2.5 times more than in both Texas and Colorado.
Will the new housing agency solve that problem? Not everyone is sure.
Of the many ways that affordable housing scarcity affects most people, the “line of the ORG chart” does not crack the “Top 100 list,” Napa Democrat Sen. Christopher Cabaldon said of the governor’s proposal at a hearing in March.
Cabaldon noted that executive reorganization is a semi-regular feature of California governance. Business, consumer services and housing institutions themselves are the products of a restructuring of California’s independent transport system.
“The secretary dance we always do, with our grand ambitions,” said Cabaldon. “Simply say that it will cause more focus and it will be streamlined and it will cause leadership level action — but how?”
As written, the new housing agency will consist of current agency housing-related entities, along with the new Affordable Housing Finance Board, who will be tasked with adjusting the housing grant program currently under the governor’s control.
However, the main sources of funding managed by the treasurer’s office remain where they are. The California Constitution would not have allowed Newsom to order those functions from an independent treasurer, even if he wanted to.
It is an important drawback, according to the Little Hoover Committee, the state government’s independent watchdog, which considers the governor’s plans before it was handed over to Congress. In its final report, the committee recommended that the governor and treasurer enter into formal agreements to “create a unified application and review process and create a review process” for all affordable financial programs based on their respective scopes.
Neither the governor’s office nor the state treasurer Fiona Masa will say whether or how they are pursuing that goal.
All single unified applications of California’s public affordable housing financing program have been the bureaucratic holy grail of California’s affordable developers and policy bureaucrats since at least the mid-1990s. The reorganization is not about demanding that, but they have set up both Constitutional Bureaus for better coordination in the future, said Matt Schwartz, president of the California Housing Partnership, a nonprofit that advocates affordable housing.
“There’s a bit of diplomacy” to make joint applications between the two administrative departments, said Schwartz, who spoke to Calmatters earlier this year after the governor first introduced the proposal. “It’s a long-term award that many of us push to get out of this process.”
Some affordable housing advocates have urged lawmakers to be cautious about tweeting various bureaucrats together.
In a letter to four powerful Democrats, the California Housing Consortium emphasized that the application system managed by the treasurer’s office is already “working very well.”
Pearl, director of the consortium, said: Before he made it into a monkey, he said, “Let’s have an agency set up.”
Pearl and the Consortium also pointed out that past laws have already required the creation of working groups to propose integrated applications. The group’s survey results are scheduled for July 1, 2026. This is due to officially disbanding of the current BCSH, with two new institutions taking their place.
It also takes just five months before statewide elections are held to replace Newsom and MA, giving voters the opportunity to decide who will shape California’s future of affordable housing policy.
Christopher writes for Calmatters, where this article originally appeared.
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