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California's Housing Agencies
The State Must Overhaul Its Approach to Affordable Housing Development to Help Relieve Millions of Californians' Burdensome Housing Costs

Report Number: 2020-108

November 17, 2020

The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814

Dear Governor and Legislative Leaders:

As directed by the Joint Legislative Audit Committee, my office conducted an audit of the State's efforts to support affordable housing projects throughout California. Our assessment focused on financing provided for affordable housing projects from four key state agencies—the California Department of Housing and Community Development, the California Housing Finance Agency, the California Tax Credit Allocation Committee, and the California Debt Limit Allocation Committee (Debt Limit Committee). The following report details our conclusion that the State must overhaul its approach to affordable housing development to help relieve millions of Californians' burdensome housing costs.

California is failing to build enough affordable homes for lower income residents in part because the State lacks an effective approach to planning and financing development of affordable housing at both the state and local levels. For example, the State does not have a clear plan describing how or where its billions of dollars for housing will have the most impact. In fact, the absence of a comprehensive and coordinated plan allowed the Debt Limit Committee to mismanage and ultimately to lose $2.7 billion in bond resources with little scrutiny, a loss that the committee failed to publicly disclose and struggled to explain. These bond resources could have helped support the construction of more affordable housing.

The State's lack of a coordinated housing plan is also evident in the four agencies' misaligned and inconsistent requirements for the affordable housing programs they administer. The resulting approval process for the programs' financial resources is cumbersome for developers who need state resources to support their projects. Because these developers must often use multiple sources of funding for their developments to be financially feasible, the misaligned requirements can slow development and increase project costs—another factor that can interfere with the State better meeting its goals for affordable housing.

At the local level, state law and state oversight are not strong enough to ensure that cities and counties are doing their part to facilitate the construction of affordable housing. Therefore, the State needs to improve its statewide housing plan, harmonize its funding programs, and strengthen its oversight of cities and counties.

Respectfully submitted,

California State Auditor