California proposes $31.7M reversion in affordable housing funding amidst budget shortfall

The Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government convened on May 19, 2025, to discuss critical housing-related proposals outlined in the May revision. The meeting began with a presentation from the Department of Finance, led by Megan Tokonaga Block, who highlighted the state's estimated budget shortfall and the proposed reversion of $31.7 million in unspent affordable housing funding. This funding, which was part of previous budget acts, was deemed underutilized due to low subscription rates in programs such as the infill infrastructure grant catalytic program and the commercial property pilot program.

Following this, Tokonaga Block introduced additional proposals from the Department of Housing and Community Development (HCD). These included funding for accountability and compliance activities, as well as a significant allocation of $417 million in one-time federal funds for disaster recovery related to natural disasters occurring in 2023 and 2024.

Sasha Kurgan, the Deputy Secretary for Housing at the Business, Consumer Services, and Housing Agency, then presented a climate-aligned housing proposal. This initiative aims to streamline housing permitting processes and enhance production by removing existing exemptions for the Coastal Commission from the permit streamlining act. It also proposes to expand access to judicial streamlining under the California Environmental Quality Act (CEQA) for larger housing projects, allowing them to utilize the same expedited pathways as smaller projects.

Kurgan further explained that the proposal would introduce a statewide vehicle miles traveled (VMT) mitigation banking system. This system would enable developers to meet VMT mitigation requirements through a fee, which would fund affordable housing and related infrastructure near transit areas, thereby linking climate goals with housing production.

The Legislative Analyst's Office, represented by Paul Steinhaus, provided overarching comments on the proposals. Steinhaus emphasized the challenging task ahead for the legislature in reviewing numerous budget proposals and suggested that the legislature focus on the fiscal situation first. He recommended deferring more policy-oriented proposals, including the climate-aligned initiatives, to allow for a thorough understanding of their implications and trade-offs.

The meeting concluded with a call for careful consideration of the budgetary challenges facing the state, highlighting the need for a balanced approach to housing and fiscal policy. The subcommittee's discussions underscored the urgency of addressing California's housing crisis while navigating the complexities of the state's financial landscape.