Conference Presentation, Panel
Will Innovative Financing Solve California's Housing Shortage?
Milken InstituteDarrell Steinberg, Beth Ruyak, Carla Boragno, David Chiu, Laura Foote Clark, Steve Hansen, Bill Witte
- California faces a critical housing deficit requiring production rates five to seven times higher than current levels, with the state currently one million units behind target levels and needing to build 100,000 additional homes annually just to keep pace with population growth.
- Governor Gavin Newsom has committed to producing 3.5 million housing units over an eight-year term if elected, utilizing entitlement reform, CEQA reform, and checks on local governments to enforce accountability for specific unit counts.
- Sacramento's "Measure Y," scheduled for the November ballot, proposes a half-cent sales tax generating $50 million annually, with plans to securitize half this revenue to establish a $500 million capital equity trust fund and allocate at least 20% to a housing trust fund.
- San Francisco's affordable construction costs have reached unsustainable levels exceeding $800,000 per unit, with a specific 335-unit Sacramento project estimated at approximately $887,000 per unit, driven by a three-year approval timeline and 40% cost increases.
- The current fiscal structure incentivizes cities to prioritize office, hotel, and retail over housing; for example, Santa Monica projects $7 million in annual revenue from commercial development compared to only $1 million from a mixed-use housing project, while a $6 million revenue gap exists for cities like Brisbane.
- California lags significantly behind historical transportation funding levels in housing allocation, with some cities dedicating as little as $100,000 annually, and local bond execution remains difficult for Alameda ($570 million), Santa Clara ($900 million), and San Francisco ($310 million).
- Federal housing strategy is absent under the Trump administration, which is reducing HUD resources and dismantling tax credit tools, leading to calls for a national policy similar to the Affordable Care Act.
- Legislative efforts include proposals to increase density within half a mile of transit stops, authorize entitlements for up to 150 units, and identify 300 acres of surface parking lots around BART stations for development.
- Persistent challenges include a legacy of racial covenants, a construction industry that has lagged in innovation and productivity, and a Prop 13-driven fee structure that forces developers to fund infrastructure cities should provide.
- YIMBY and advocates aim to permanently shift laws to eliminate the need for project-by-project advocacy, targeting the "millennial" demographic for activism while seeking to align older homeowners with pro-housing density options.
- Risk factors include the potential for the housing system to "break" if incentive structures are not fixed, the unsustainability of relying on securitization due to high capital costs, and the difficulty of achieving equilibrium on housing prices without addressing Prop 13 incentives.