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ON THE RECORD - The adage "money makes the world go round" is a proverb especially true today for affordable housing. An estimated 39,880 affordable units across California are fully approved and ready for development but remain on hold, bottlenecked by a shortage of public funding.
The lack of affordable housing is the primary driver of homelessness, exacerbated by skyrocketing rents, stagnant incomes, and severe shortage of available, low-cost units. This crisis is intensified by systemic issues like poverty, inadequate mental healthcare, and insufficient social safety nets.
President Barack Obama called the homelessness crisis "an atrocity given the billions of dollars elected officials have thrown at the problem over the years"
Each of these units is presently supported by substantial, though ultimately inadequate, funding. The development of affordable housing in California depends on a complex capital stack that incorporates federal and state tax credits, tax-exempt bonds, local contributions, and private financing. However, the essential state funding component has been exhausted, and there are no new allocations anticipated for fiscal years 2026–27.
The last time California injected a large, multi‑year pool of capital into its affordable‑housing finance system was through a 2018 voter-approved bond (Proposition 1, the Housing Programs and Veterans’ Loans Bond Act), which authorized $4 billion in general-obligation bonds for housing programs, now exhausted. Only scattered sources remain.
Currently, we have reached the end of the most recent funding cycle, since the system relies on substantial funding injections that come every 8 to 10 years.
Developers are typically unable to seek federal affordable-housing funds until they have obtained a state grant, and this order of operations represents a little-known bottleneck in California’s financing system. The problem arises not from a single regulation, but from how several programs affect each other.
In my book, The Making of Modern Los Angeles, I had written that a developer may seek funding from the city or county as well as the state and federal governments. But rather than apply to the various agencies simultaneously, the developer must secure funding from the city and county first, before being able to apply for state funding. And the developer may not be able to apply for federal funding until being awarded the state funding. If the developer's application is not selected, the developer must wait until the next round of funding to reapply, which could take from several months to a year. In addition to the lengthy process of securing funding, the city's approval process can add to the timeline because developers must wait for multiple departments to sign off on their plans, a process than can take up to a year.
Each additional funding source delays the start of construction on a project by an average of four months, adding an extra $20,460 per unit, according to an analysis by the Terner Center for Housing Innovation at UC Berkeley. Consider for a moment how costs multiply if no state funds are available and projects are held in limbo. Today, many ready developments have been sitting for a year or two waiting for funding, stuck in a financial halfway house.
I also identified numerous ways the state, county and city can reduce the cost of affordable housing. A number of these recommendations have been enacted into local laws to accelerate approvals and ease zoning restrictions. Despite this, actual housing construction depends on financing rather than just getting approval.
A comprehensive and unambiguous overview of the data, as reported by Enterprise Community Partners, a national nonprofit, clearly show the following: for the approved projects, developers need $2.3B in state subsidies, $1.8B in state tax credits, and $5.8B in tax‑exempt bonds to start construction. Obviously, the math does not work if there are no available state funds.
Rising construction costs have widened the gap, and I have also warned that the present system to end homelessness is comprised of a failed structure that I called the “Homeless Industrial Complex.” Funding from local, state, and federal sources was continuously made available, and vested interests gradually and methodically influenced public policy and had clear access to those funds.
Hope lies in the Affordable Housing Bond Act of 2026, which is moving well in the Legislature and known in the Assembly as AB 736 (Wicks), and in the Senate as SB 417 (Cabaldon). It will place a $10 billion statewide affordable‑housing general‑obligation bond on the June 2, 2026 ballot. It will also simplify the state's housing finance system, and tackle rising operating costs like insurance and utilities that make it challenging to maintain projects.
The legislation includes explicit language that states proceeds must be used to finance the affordable housing programs under the State General Obligation Bond Law. These comprise the Multifamily Housing Program, the backbone of affordable rental housing finance; CalHome, offering down-payment assistance and homeownership support for low-income families; housing for agricultural workers; permanent supportive housing for individuals leaving homelessness; and efforts to rehabilitate and preserve existing affordable units.
However, even with voter approval, the bond will not be issued until 2027 at the earliest and will not affect the 2025–26 state budget. The bond is critical, but the timing means California experiences a full year of paralysis even if the bond passes. That year marks the system's highest risk of permanent contraction.
California has proposed three main strategies for 2026, from the Governor, Legislature, and housing-policy groups, to prevent a drop in affordable housing production before the new bond takes effect. These make up the state's current stop-gap plan. The proposals try to keep the system alive until the bond money arrives in 2027.
The governor suggests merging affordable housing funding programs to lower delays and costs. Legislators are proposing bills to safeguard current affordable housing and boost efficiency, while analysts recommend establishing a stable, ongoing revenue source not reliant on periodic bonds to prevent system failure during funding shortages.
California's ongoing strength has historically been its capacity to rebuild. Recovery always results from institutional resilience, the collective ability of officials at all levels and citizens to adapt to evolving circumstances. The present housing crisis represents another significant turning point in the ongoing California narrative.
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(Nick Patsaouras is an electrical engineer, civic leader, and a longtime public advocate. He ran for Mayor in 1993 with a focus on rebuilding L.A. through transportation after the 1992 civil unrest. He has served on major public boards, including the Los Angeles Department of Water and Power, Metro, and the Board of Zoning Appeals, helping guide infrastructure and planning policy in Los Angeles. He is the author of the book "The Making of Modern Los Angeles.")
