Governor Newsom Releases “May Revise” Budget Plan

Many Budget Proposals Could Impact Rental Housing

On Friday, May 14, 2021, Governor Newsom released information on his latest budget proposal for the State of California. The details of the latest proposal may be found at www.ebudget.ca.gov/FullBudgetSummary.pdf.

This update follows upon Governor Newsom’s announcement last Monday that the state intends to pay rental housing providers 100% of the rent owed by tenants who qualify for COVID-19 rental assistance through an additional $2.6 billion in rental assistance from the Federal government, bringing California’s total federal rental aid to $5.2 billion.

A summary of the Governor’s latest budget proposal released this past Friday follows:

Housing

California’s statewide housing shortage has been decades in the making—long before the COVID-19 pandemic. In recent years, the state has made significant investments to bolster much-needed affordable housing production through tax credits, housing-related infrastructure grants, and financing loans. The pandemic further exacerbated the statewide housing shortage and impacted housing affordability.

The May Revision promotes and maintains stable housing through additional and expanded rental assistance, foreclosure prevention, and down payment assistance investments. Moreover, to continue the momentum on housing production, the Administration also proposes innovative ways to further plan, produce, preserve, and enhance the state’s supply of long-term affordable housing. The following May Revision concepts build upon the $750 million in investments proposed in the Governor’s Budget, for a total 2021-22 housing package of $9.3 billion.

Homeowner and Renter Relief

The pandemic brought unprecedented challenges for renters and homeowners. To provide much-needed economic relief and recovery, the state has sought to maximize federal funds and enact laws benefitting renters, small landlords, and homeowners. In August 2020, the Governor signed Chapter 37, Statutes of 2020 (Assembly Bill 3088), providing eviction protections for renters through March 1, 2021. To protect homeowners struggling to pay mortgages, the Administration also worked with financial institutions to provide a 90-day grace period of mortgage payments with no negative credit impacts, relief from fees and charges, and a 60-day moratorium on foreclosure sales. The Governor later extended these protections by supplementing up to 18 months of mortgage forbearance provided by the federal government for homeowners experiencing financial hardships in paying federally backed mortgages. Building on those measures, the May Revision proposes the following additional augmentations to provide additional relief.

California’s COVID-19 Rental Relief Program

In January 2021, the COVID-19 Tenant Relief Act, Chapter 2, Statutes of 2021 (Senate Bill 91) was signed, creating the California COVID-19 Rent Relief Program. This program provides up to $2.6 billion in Federal rental assistance to those facing financial hardships as a result of the pandemic and extends the eviction protections through June 30, 2021. Subsequent to the state’s program deployment in March 2021, the Federal American Rescue Plan Act of 2021 (ARPA) provided for an additional $2.6 billion to California for both state and local entitlement jurisdictions for a total of $5.2 billion in federal rental relief aid.

The May Revision includes statutory amendments to maximize the use of available federal funds for rental, utilities, and housing-related expenses to help as many Californians as possible stay housed, while bolstering the economic resiliency of those hardest hit by the pandemic. Additionally, the state continues to utilize $331 million in National Mortgage Settlement funds for mortgage assistance. The state is also preparing to utilize $1.0 billion from ARPA Homeowner Assistance Funds to the California Housing Finance Agency (CalHFA) to provide additional mortgage assistance, principal reductions, and qualified housing-related charges to provide housing stability.

Expanded Homeowner and Rental Assistance

To further protect homeowners and renters experiencing unprecedented economic hardships, the 2019 and 2020 Budget Acts appropriated $51 million in grants to community-based organizations that offer eviction and foreclosure counseling, consultation, mediation, training, education, and representation. As homeowners and renters continue to face economic challenges caused by the pandemic, the May Revision includes $20 million in federal ARPA Coronavirus State Fiscal Recovery Funds for the next three years ($60 million total) to the Judicial Council to continue providing legal assistance grants to over 100 legal service and self-help organizations.

Increasing Housing Production

The May Revision proposes $1.75 billion one-time Federal ARPA funds to help support the Department of Housing and Community Development affordable housing projects. This will help more than 6,300 units of shovel-ready affordable housing move forward quickly rather than accumulating costs while waiting for a potential future tax credit. This effort will be combined with other homelessness proposals mentioned later in this update.

Accessory Dwelling Units

Accessory Dwelling Units (ADUs) have become an increasingly popular and cost-efficient tool to create needed housing. Chapter 159, Statutes of 2019 (Assembly Bill 101) provided $19 million General Fund for CalHFA to finance ADUs for low- and moderate-income households, which is anticipated to begin in July 2021. To foster greater economic recovery and affordable housing, the May Revision includes an additional $81 million one-time federal ARPA funds to expand CalHFA’s ADU program to inject a total of $100 million in available financing for ADUs. Because ADUs have quicker local approvals, this proposal will further expedite low-cost production and more quickly increase the housing units statewide.

Scaling Up Development and State Excess Sites

The state is committed to expanding and streamlining the development of housing on available excess state sites. To further encourage participation in the state excess lands program, the Governor’s Budget proposed trailer bill language to permit phased and commercial development needed to develop more affordable housing. To keep the momentum going on this effort, the May Revision proposes $45 million in one-time federal ARPA funds that would scale up excess land development by providing funding for vital infrastructure for viable housing projects.