Proposed California budget to allocate $1.75 billion in new funds for affordable housing

New California Gov. Gavin Newsom has proposed in his state budget that $1.75 billion in new funds would be earmarked to solve the state’s affordable housing shortage.

In the campaign, he had pledged to oversee production of 3.5 million new housing units statewide, calling for a “Marshall plan for affordable housing.”

While the $7.7 billion overall set aside for housing and homelessness is much lower than the $13 billion invested in Post World War II recovery under the actual Marshall Plan, it is still a significant increase from the $5 billion for housing and homelessness in the previous state budget. (Of course the dollar was worth much more in the 1950s — in current dollars, the Marshall Plan funds would be worth more than $100 million.)

“We’re not playing small ball on housing,” Newsom said on Jan. 10.

Under the new budget, if cities meet new benchmarks for housing production, they’ll be able access a $500 million money pool. If they fail to reach those thresholds, the cities could lose out on transportation funding projects through California’s gas tax.

“To me, housing is transportation; transportation is housing,” said Newsom. “You don’t reach those goals, we’re going to take SB1 money from you.”

The new approach could create challenges for Los Angeles, one of 526 cities that have failed to meet its housing goals. The city relies on gas tax funding for significant transportation projects including a new rail station to eventually link riders to a new LAX people mover system.

Newsom outlined plans to set new regional goals for housing that would be “more realistic, and more nuanced” than the current goals.

Los Angeles Mayor Eric Garcetti says he is confident in the city’s ability to meet the as-yet-unset new housing goals.

“I applaud the Governor for stepping up and proposing nearly $2 billion to amplify and grow our work to build more housing units,” Garcetti said in a statement. “He and our legislators will be strong partners as we continue this fight.”

The budget also includes $1 billion for state programs aimed at boosting construction of housing for low- and moderate-income earners. There is an additional $500 million for cities building shelters and supportive housing for the state’s growing homeless population.

The budget must be approved by the state legislature, and will likely be revised significantly before it becomes law.