In summary
The Legislature is willing to guarantee $500 million annually to affordable housing developers, but with a caveat.
The Legislature has foisted a $500 million compromise on affordable housing developers and one of the state’s largest construction unions. Not everyone likes the deal and it’s not at all clear that Gov. Gavin Newsom will sign off on it.
On one side of the bargain is more money for subsidized housing. A bill by Encino Democratic Assemblymember Jesse Gabriel would guarantee half a billion dollars annually for affordable housing construction. The Legislature has been tacking this “enhanced” state low-income housing tax credit program into every annual budget since 2020. It even made it into this year’s spending plan, despite significant cuts to other housing programs. Gabriel’s bill would make the program a sure thing through the end of the decade.
Nevada Merriman, vice president at MidPen Housing, a nonprofit developer, said that cementing in place one of the Newsom administration’s “signature” housing programs for the next five years “would help us build a lot of certainty.”
But that funding comes with terms attached. Earlier this year, Gabriel’s proposal was tied to a bill by Assemblymember Matt Haney, a San Francisco Democrat, that would require affordable housing developers who make use of the state tax credit program to pay their workers union-level wages.
The funding proposal is sponsored by the California Housing Partnership, a nonprofit that advocates for affordable housing, and is backed by other subsidized developers while the wage proposal is being pushed by the state’s carpenters union. Though the carpenters support both bills, affordable housing developers oppose the wage proposal, arguing that the higher costs would lead to the production of fewer affordable units.
A recent study by UC Berkeley’s Terner Center for Housing Innovation estimated that adding such wage requirements to a sample of recent tax credit-funded projects would have raised construction costs by anywhere from $84,800 to $106,700 per unit.
The carpenters have countered that taxpayer funding should be used not solely as a means to build more housing, but also to support and expand the labor force needed to build it.
So-called prevailing wage requirements are a hallmark of most publicly funded construction projects. The low-income housing tax credit program, the nation’s largest source of funding for affordable home construction, is an exception. Many construction unions have been hoping to change that for years.
“When the government steps into the market, as a market participant, it has more than one policy in mind, and one of them is taking care of the workforce,” said Danny Curtin, director of the California Conference of Carpenters, at a committee hearing earlier this year.
The forced marriage was struck after the two bills reached the Assembly Appropriations committee. Its chair, Buffy Wicks, an Oakland Democrat, has spent years cobbling and holding together an unlikely coalition of developers and carpenters to pass legislation intended to speed up the construction of subsidized units and apartment buildings. Suddenly two sides of that delicate team were beefing. After emerging from her committee, the two bills had language making their passage conditional on the success of the other. They would sink or swim together.
Now that the Assembly and Senate have passed both bills, it’s over to Newsom. In the past, the governor has readily vetoed big spending bills that have circumvented the annual budget process. The administration has not indicated whether the governor will apply the same logic to his “signature” affordable housing proposal or how he will weigh the costs of higher wage requirements against the benefits of a better compensated workforce. Newsom has until the end of September to decide.