Can Public Agency Land Use Help Save Us from the State Housing Crisis?

Along with being well known for its near perfect weather and plethora of offerings for tourists, California has now also become known for facing one of the worst housing crises in the nation.  A study done in 2016 by the McKinsey Global Institute found that California was ranked 49th out of all 50 states in housing units per capita and losing close to $140 billion per year due to the shortage of housing.  Based on California’s HCD Annual Progress Report data compiled in early 2018, more than 97% of the state’s jurisdictions are failing to meet the goals for developing affordable housing.  This harsh reality has left the state to ponder what resolutions could be utilized for tackling this dire dilemma.

Some recent proposed solutions to the housing crisis have come in the form of the 2017 Legislative Housing package signed into effect by Governor Jerry Brown in September of last year which includes 15 bills aimed at addressing the housing crisis.  However, with the housing crisis being as wide spread and serious as it is, it will likely require solutions in addition to recently passed legislature.  Circulate San Diego recently released a report examining the conversion of the underutilized Metropolitan Transit System parking lots into affordable housing as a solution to the state’s housing crisis.  Their report identified that this plan would not only generate up to 8,000 new homes with 3,000 of those designated for low income use, but the plan also aligns with similar policies and practices already in use by fellow transit agencies like the LA County MTA, Bay Area Rapid Transit and Santa Clara Valley Transportation Authority.

The report from Circulate San Diego begs the question: Could an answer to the state housing crisis lie in the use of other under used public agency land too?  In addition to transit systems, other public agency properties including school districts, utility districts and water districts, may provide some respite in the struggle to reign in the housing crisis.  This possible solution does not come without it’s fair share of challenges which may include the need to enhance or remove the existing infrastructure, zoning restrictions and community engagement of the surrounding area which for low income and affordable housing specific development may give way to objections from those with the “not in my backyard” perspective.  Despite the possible challenges that may lie ahead with the use of public agency land for housing development, state officials may find this a solution worth considering in the struggle to resolve the state housing crisis.

Business and Industry Loan Guarantees in California

The US Department of Agriculture (USDA) offers business and industry loan guarantees in California as an economic development funding source to enable commercial lenders to provide more affordable financing for businesses in eligible rural areas and small towns. The program reinforces the existing private credit structure by guaranteeing loans for rural businesses, enabling private lenders to extend more credit. There must be sufficient collateral to protect the interest of the lender and the agency.

Borrowers can be for-profit businesses, nonprofits and cooperatives, federally-recognized tribes, public bodies and individuals. Guaranteed loan funds may be used for business conversion, enlargement, repair, modernization or development; purchase and development of land, easements, rights-of-way, buildings or facilities; purchase of equipment, leasehold improvements, machinery, supplies or inventory; debt refinancing when new jobs will be created and other conditions are met; and business and industrial acquisitions when the loan will keep the business from closing and/or save or create jobs.

Contact RSG to guide you through the process of obtaining a loan.

Written by Dima Galkin, an Associate at RSG

The Future Of Cap-And-Trade

On January 7, 2016, Governor Jerry Brown presented a cap-and-trade expenditure plan for Fiscal Year 2016-17, totaling $3.1 billion. Because the carbon market appears to be underperforming, some legislators question whether the program should extend beyond its sunset in 2020.

The cap-and-trade program in California is contentious in many ways. While many can agree on the end goal of reducing carbon emissions, there is a financial problem when the carbon market is generating inadequate revenue. The most recent auction in May was expected to yield $150 million in revenue, but generated $2.5 million after only 11% of the available credits were purchased.    

As a result, big plans to spend cap-and-trade revenue were scrapped. The California High-Speed Rail Authority, which receives 25% of carbon sales proceeds, is the largest beneficiary of cap-and-trade dollars and relies on auction proceeds to fund rail construction. Without these funds, high-speed rail’s future looks bleak.

Local governments are affected as well, because a percentage of carbon proceeds helps fund grants for affordable housing (20%) and intercity rail projects (10%). Cities looking to build affordable housing or break ground must pay for the projects themselves or seek other funding sources.

Supporters of cap-and-trade and high-speed rail say the blip in May does not mean dismal failure. They believe that the lack of demand for carbon credits is proof that the program is actually successful. The cap-and-trade law, signed in 2006, proposed to reduce greenhouse gas emissions to 1990 levels by 2020. Less carbon credits on the market means less carbon is emitted, and carbon emissions in California have been falling at a high rate.

Opponents of the program claim that the program will fail as a surplus of carbon credits reduces their value. Because market forces determine the price of each carbon credit, numerous market failures can bring prices to an artificially low point. Other critics call the program unconstitutional, because it functions as a tax, which requires a two-thirds vote by the Legislature to be approved.

The program does not sunset until 2020, but today’s successes and challenges of the program will dictate whether the law will extend past 2020.

Written by Jeff Khau, a Senior Analyst at RSG

Dissecting Brown’s Budget

Image courtesy of

Image courtesy of

Governor Brown and the California legislature approved a $122.5 billion budget to fund state operations for 2016-17. The budget allocates $400 million for affordable housing construction, increases preschool/child care funding by $500 million, increases reserves by $2 billion, invests $200 million in college readiness programs, and redirects $2 billion in Proposition 63 mental health funds to provide housing for mentally ill homeless people.

Putting an extra $2 billion into the rainy day fund suggests that state lawmakers are weary about a looming recession. There was a notable focus on alleviating poverty and income inequality in this year’s budget process. Brown and lawmakers failed to agree on a spending plan from the state’s greenhouse gas reduction fund, also known as the cap-and-trade fund, and failed to reach a deal on funding to fix crumbling roads and highways, which they have labeled as a top priority for several years.

To learn more about how the state budget impacts your local community and how you can make the most of it, contact RSG.

Written by Jeff Khau, a Senior Analyst at RSG


Budget Battle

California Governor Jerry Brown recently released the 2016-2017 budget revision, which did not include an allocation from the state surplus for affordable housing purposes.  While the budget proposal refers to several initiatives that could ease the affordable housing crisis, they are not part of the budget allocation that would increase the amount of money available to fund housing. 

The state does not control land use decisions, but it can help to subsidize the development of affordable units. About 3 percent of homes and 11 percent of rental units are affordable through legally binding restrictions, and about two-thirds of the affordable units get state funding through tax credits or subsidies from state departments. While demand for low-income housing has increased, lengthy local land use and review processes have provided less than half of the affordable housing needed.

Thus, the state’s fiscal investment in housing must be maximized to speed up construction while lowering costs and avoiding delays. The state needs to target new and existing housing resources to support state policies and objectives.

June 15 is the deadline for the state legislature to pass the budget bill. We believe that state assembly members must invest $1.3 billion of the state's budget surplus for affordable housing.  Let’s reach them by mail, e-mail, social media and in person. California’s future depends on it.

Written by Tara Matthews, a Principal at RSG