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Budget Draft Includes Policy Principles, but Little Money, for Housing

Josh Stephens on
Jan 11, 2017
In his second-to-last budget, Gov. Jerry Brown has not set aside money for affordable housing -- but he has proposed a broad set of policies to reduce cost and regulation and increase supply. 

Last year Brown proposed a $400 million expenditure on affordable housing. That was tied to the passage of a “streamlining” bill that would have eliminated certain discretionary reviews that often tie up infill housing developments. Brown has taken that $400 million off the table and instead presented a suite of principles and reforms meant to spur market-rate development statewide. 


“What we can do is cut the red tape, cut the delays, cut whatever expenses we can afford to do without to make housing more affordable and therefore increase the stock and therefore hopefully bring down the costs,” said Brown at the press conference in which he discussed the budget. 
These reforms include the following: 

Streamline Housing Construction Reduce local barriers to limit delays and duplicative reviews, maximize the impact of all public investments, and temper rents through housing supply increases.

Lower Per-Unit Costs Reduce permit and construction policies that drive up unit costs.

Production Incentives Those jurisdictions that meet or exceed housing goals, including affordable housing, should be rewarded with funding and other regulatory benefits. Those jurisdictions that do not build enough to increase production should be encouraged by tying housing construction to other infrastructure‐related investments.

Accountability and Enforcement Compliance with existing laws — such as the housing element—should be strengthened. 

The housing proposals in the budget come on the heels of the release of the draft state housing assessment, which said that the state must produce almost 2 million additional units in the next 10 years -- most of it affordable housing. Housing production dropped precipitiously in the Great Recession and has never really recovered.


Overall, Brown's budget prediction was dour. Brown has alluded to a possible economic downturn after a half-decade of sustained growth, and he has expressed uncertainty about how the economy will perform and about how much federal monies California will receive under the administration of President-elect Donald Trump. 

"This year’s budget will be the most difficult that we have faced since 2012,” wrote Brown in his cover letter to the legislature. "The surging tide of revenue increases that we enjoyed the past few years appears to have turned. Instead, we now face a budget deficit of $2 billion. While this amount pales in comparison to the $27 billion deficit we faced in 2011, it demands our attention."

The budget proposes a total of $122.5 billion in general fund spending.

“We've got to bring down the cost structure of housing and not just find ways to subsidize it,” Brown said in a press conference Tuesday, according to the Los Angeles Times.

The budget accounts for $3.2 billion in state and federal funding that is already authorized, but it includes no new funding because “[i]ssuing further General Obligation bonds would be an inefficient and ineffective use of General Fund resources.” The budget cites the passage of several laws last year intended to promote affordable housing as well as the approval of a total of $2.7 billion in local bond measures.

In other categories related to land use, the budge includes $4.3 billion in new funding for transportation. it also calls for legislation to renew the state's commitment o the cap-and-trade program. The budget includes $2.2 billion from auction proceeds to be spent on a variety of projects, with an emphasis on disadvantaged communities. 

The budget kicks off a 10-year cycle of a total of $43 billion of expenditure for the following projects and programs:


Active Transportation Program $1 billion Cap and Trade for Caltrans to expand the grant program for local projects that encourage active transportation such as bicycling and walking, with at least 50 percent of the funds directed to benefit disadvantaged communities. 

Local Streets and Roads/Local Partnership Funds About $11.4 billion in Shared Revenues to be allocated by the Controller to cities and counties for local road maintenance according to existing statutory formulas, and over $2.2 billion in state‐local partnership grants.

Sustainable Transportation Grants An increase of $25 million annually for competitive planning grants to assist regions and local governments in achieving the sustainable transportation requirements in Chapter 728, Statutes of 2008 (SB 375), and other State objectives. 

Corridor Mobility Improvements An increase of over $2.7 billion for multi‐modal investments on key congested commute corridors that demonstrate best practices for quality public transit and managed highway lanes such as priced express lanes or high‐occupancy vehicle lanes. Included is also $25 million annually to expand the freeway service patrol program. 

Transit and Intercity Rail Capital Program An increase of over $4.2 billion (including $4 billion in additional Cap and Trade as well as $256 million from loan repayments) for transit capital investments that provide greenhouse gas reductions, with at least 50 percent of the funds directed to benefit disadvantaged communities. 

Highway Repairs and Maintenance An increase of almost $18 billion (including $1 billion from Caltrans efficiency savings) for Caltrans to fund repairs and maintenance on the state highway system. 

State Transportation Improvement Program (STIP) An augmentation and stabilization to the STIP, which should not only allow the California Transportation Commission to restore funding for $750 million worth of projects cut from the program in 2016, but also program approximately $800 million in new projects in the 2018 STIP. 

Trade Corridor Improvements An increase of over $2.8 billion (including $2.5 billion in new revenues and $323 million from loan repayments) for Caltrans to fund projects along the state’s major trade corridors, providing ongoing funding for a program originally established with $2 billion in one‐time Proposition 1B bond funding. 
The legislature will now consider the budget proposal, with a revision in May, and the deadline for final approval July 1.