California’s Housing Shortage is Not for Lack of Money

California cities have more funding than ever for affordable housing projects, but they still can’t keep up with demand for new homes

Despite its problems, one thing California does have is lots of money. The state saw a 7.8 percent increase in its GDP from 2020 to 2021 (the biggest jump since 2000), and is currently enjoying a record $97 billion budget surplus—yet it’s still a nightmare to find a reasonable place to live, and the homeless population continues to grow with no solutions in site.  

The only problem is that money is not the problem, according to the Courthouse News.  

Earlier this year, state officials announced that California needs to build 2.5 million homes by 2030 in order to combat the current housing crisis, according to Mercury News. The goal is fairly ambitious, considering that in the previous eight-year housing plan only 588,344 homes of its 1.2 million goal were actually constructed. 

But despite the near perfect storm of California’s housing shortage—a fast-growing economy, urban density, and a rapidly growing homeless population—many experts still believe that there are various solutions to mitigate the massive shortage of homes while maintaining economic diversity in major cities. 

Courthouse New reports that while California’s cities have received more funding than ever for affordable housing projects, many are struggling to get those projects off the ground fast enough to keep pace with demand.

The director of Housing and Community Development in Oakland, Shola Olatoye, said that the city has received roughly $322 million from the state since 2020 and has leveraged $1.8 billion in that time, according to CN. Likewise, San Francisco received $449 million in state funds for affordable housing.

But the appallingly disorganized and complicated ways in which this money is distributed are largely responsible for the infuriating sloth of such projects.

According to CN, California’s cities rely on highly competitive state and federal funds, such as the Community Development Block Grant Program, which awards housing grants annually. Otherwise, grants can be allocated by the governor and state legislature for certain housing projects that demonstrate how they will benefit their community. The state has recently set aside hundreds of millions for similar programs that pit cities against one another as they compete for cash. 

Housing grants are often taken out of the state’s annual budget surplus, so it’s almost impossible for each city to know just how much funding they are going to receive for housing projects from year to year.

With money coming from all over the place and the amount of funding that cities receive each year not guaranteed, it is increasingly difficult for California’s urban centers to set out long-term housing plans. 

Kevin Burke of the nonprofit East Bay for Everyone said the state’s many funding sources make it expensive and time-consuming to propose affordable projects. 

While an effort was made this year with Assembly Bill 2305 to consolidate the state’s funding sources, it failed to pass the state senate. 

Another bill coming up in Sacramento, AB 2011, seeks to simplify the process of relocating affordable housing developments into commercial and retail spaces, according to Matt Schwartz, CEO and president of the California Housing Partnership. 

Schwartz told CN the bill “would set aside 5% of general fund revenues each year to use to combat homelessness and for permanent affordable housing,” allowing developers to move forward with projects “without the uncertainty and the ‘stop and start’ nature of what exists today.”

Other potential policy changes that would support housing projects include Senate Bill 9 which allows homeowners to split single-family homes into multiple units, saving valuable space for new developments and increasing housing density. 

City housing developers are also concerned about the effect of gentrification on economic and ethnic diversity in urban populations. 

Ryan Finnigan, a senior research associate at Berkeley’s Turner Center, warned that new housing projects must be paired with strong tenant protections so that residents with lower incomes are not displaced as higher income renters move in. Finnigan insists that new housing must include a wide range of price levels in order for cities to effectively combat gentrification and maintain economic diversity. 

“The presence of market-rate housing actually stops displacement, because higher income folks would move to these vulnerable neighborhoods whether or not there’s new construction,” Berkeley Lecturer David Garcia told CN. 

Garcia added that new housing can also protect against rent hikes as property companies attempt to buy out older buildings in lower-income neighborhoods. 

Affordable housing projects are particularly important in places like Oakland where 60 percent of the city’s residents live in rental units. Oakland also has a disproportionately lower rate of home ownership in its Black and Latino population, according to CN. 

“That is the legacy of segregation and everyone is going to have their share of an economically diverse city,” Olatoye, Oakland’s Housing director told CN. “East and West Oakland were the target of decades-long segregationist housing practices. Now we have an opportunity to both redress those practices and more equitably distribute housing throughout the city.”

While the need remains for a major upheaval of some of the state’s housing policies, there are steps being taken in the right direction. 

Vice president of San Diego’s Housing Commission, Scott Marshall, told CN that more than 2,000 affordable units are set to begin construction with about $16 million at the ready for more affordable rentals. 

In Sacramento, the city has created a Housing Trust Fund using money from its budget surplus. The state capital invested $31.5 million in 2020 for 644 units, which broke ground last month. 

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