The apartment building planned on East Morris Avenue in Modesto is exactly the kind of thing that California\u2019s political leaders want to see a whole lot more of: The project promises 44 units of affordable housing \u2014 half reserved for people without homes. It\u2019s received zoning approval, weathered public feedback, earned the support of local elected officials and sits beside a busy bus line. Once built, the project promises on-site mental health services, job training and Zumba classes.<\/p>\n
What the project lacks is money.<\/p>\n
Having quilted together a financial patchwork of local government and corporate grants, private debt, and a plot of land donated by a foundation, it remains just shy of the total needed to break ground.<\/p>\n
Six years and 13 funding applications after it was first proposed, the Morris Village project sits ready, but waiting.<\/p>\n
An estimated 39,880 affordable units across California are stuck in financial purgatory, according to a new report<\/a> by Enterprise Community Partners, a national nonprofit that funds, consults and advocates for affordable housing. That\u2019s 461 \u201cshovel-ready developments\u201d that, like the one on East Morris, are fully designed, legally green-lit and backed with a significant \u2014 but still insufficient \u2014 amount of money.<\/p>\n Many have \u201cbeen sitting for a year or two waiting for funding,\u201d said Justine Marcus, policy director for Enterprise\u2019s Northern California office and one of the report\u2019s co-authors. \u201cThere\u2019s no exit route right now. It\u2019s a bottleneck.\u201d<\/p>\n California lawmakers are considering a record-breaking $10 billion affordable housing bond<\/a> for the 2026 ballot.<\/p>\n For many developers and affordable housing advocates, that bottleneck represents an especially frustrating inconsistency of California public policy. Lawmakers are desperate to see the state build more homes \u2014 of all kinds, but especially for people with the least ability to pay the state\u2019s exorbitant rents. State housing regulators have ordered local governments to plan for the construction of an additional 2.5 million units<\/a> by the end of the decade. One million of those are supposed to be for people making less than 80% of each region\u2019s median income.<\/p>\n As a general rule, that\u2019s a population of hard-up renters that the private market has been unable to profitably serve at scale. To fill that gap, non-profit low-income housing developers typically turn to taxpayer-funded support. At the moment, according to the report, there isn\u2019t enough of that to go around.<\/p>\n Enterprise took publicly available but hard-to-parse applicant lists from seven subsidy programs administered by various wings of California\u2019s state government going back three years. With a combination of number crunching and a little inference, the report estimates that clearing the current backlog would require an extra $4.1 billion, split between state administered grants, low-cost loans and tax write-offs.<\/p>\n Once awarded, this final layer of state subsidy has to be spent in relatively short order. That means this list of 39,880 units comprise a group of affordable housing projects that are all but ready to go, said Marcus. \u201cThey kinda have to have their (stuff) together.\u201d<\/p>\n Case in point: Two-thirds of the projects on the list have already received support from at least one other state program. Those dollars aren\u2019t awarded to just any developer, said Betsy McGovern-Garcia, vice president of Self-Help Enterprises, one of two non-profits behind Morris Village.<\/p>\n \u201cThese are all projects that are close to amenities,\u201d she said. \u201cThese are all projects providing resident services. These are all projects that are financially feasible\u2026They are all meeting the bar for what we want to see as a state out of our affordable housing community.\u201d<\/p>\n In February, McGovern-Garcia and her colleagues applied for a final round of financial support from the state \u201cto close the gap\u201d and finally start construction.<\/p>\n \u201cWe are optimistic this might be our round,\u201d she said in an interview, her fingers crossed.<\/p>\n A moving bottleneck<\/p>\n California has seen gridlock in affordable housing production before, but the precise location of the traffic jam has changed over time.<\/p>\n When Nevada Merriman was leading a team of affordable developers in Silicon Valley a decade ago, she said local approval was the major hold-up. Getting the legal okay to build low-income housing on a particular site in a particular town required developers to run a gauntlet of planning department and city council meetings, win over hostile neighbors with costly concessions, community meetings and design revisions and to fend off the ever-present possibility of litigation. Because relatively few projects survived that ordeal, the competition for funding on the other side wasn\u2019t especially stiff, said Merriman, who is now policy advocate for MidPen Housing, an affordable developer in San Mateo County.<\/p>\n That began to change earlier this decade. California lawmakers began passing laws overriding these local impediments \u2014 especially for affordable projects<\/a>. All of a sudden more projects were clearing those early regulatory hurdles and competing for Low-Income Housing Tax Credits, the federal government\u2019s signature affordable housing construction subsidy. The bottleneck moved further up the road.<\/p>\n But then that too began to change late last year. Buried in President Donald Trump\u2019s signature tax bill from 2025 was a significant boost<\/a> to the tax credit program. (Specifically, the law increased the total supply of one type of credit while allowing another kind to be spread out over twice as many projects).<\/p>\n Which brings us to the latest bottleneck.<\/p>\n Now projects can get through local approval. They can more easily acquire the final and most important layer of federal financing. But project sponsors typically can\u2019t apply for that until all other financial holes are plugged.<\/p>\n \u201cWe\u2019re looking for state sources to fill that gap,\u201d said Merriman. \u201cWe want to make sure we don\u2019t leave those federal sources on the table.\u201d<\/p>\n MidPen currently has 1,198 units spread across seven developments waiting for that last bit of funding, she said. \u201cShould there be a source\u2026there\u2019s a pipeline that is ready to go.\u201d<\/p>\n California\u2019s last major infusion of public affordable housing dollars came in the form of a voter-approved bond<\/a> in 2018. That well has run dry. A hodgepodge of funding streams remain.<\/p>\n Adding together funding that has already been approved by legislators but not yet spent and a variety of other state and federal sources, California\u2019s Housing and Community Development department says at least $1.8 billion should be available for affordable developer applicants this year. Gov. Gavin Newsom\u2019s budget proposal for the coming fiscal year doesn\u2019t include any new discretionary spending beyond that.<\/p>\n Boosters of more funding have reasons to be optimistic. Newsom has taken such an austere posture in early budget negotiations before only to have the Legislature successfully pour hundreds of millions<\/a> of dollars of affordable housing subsidies back into the final budget agreement.<\/p>\n If a majority of voters go for the new housing bond, \u201cwe\u2019d be off to the races,\u201d said Merriman.<\/p>\n Cutting costs<\/p>\n One way to get more affordable housing built is by spending more money. The other is trying to make the existing money go further by cutting costs.<\/p>\n The cost of affordable housing construction is notoriously high in California: A 2025 study estimated that tax credit-financed projects here cost two- to four-times the amount<\/a> of comparable projects in Colorado and Texas. There is no single reason for this disparity. Land costs in California are significantly higher. So too, often, is the cost of labor. Regulatory barriers like restrictive zoning, slow permitting and stiff impact fees<\/a> are frequently named as culprits. Sometimes old-fashioned construction methods and materials get blamed.<\/p>\n But there\u2019s also the cost of just waiting around.<\/p>\n A typical affordable development in California will have two or three public funding sources, with some drawing on six or more. Many of these sources are awarded on their own timelines. Each has its own program-specific requirements that can take time to meet. Some are conditional on the receipt of another. As time goes by, developers still have to make payroll, pay interest on pre-construction loans and watch as inflation drives construction costs up further. As delays compound, funding sources that have already been secured might expire, setting things back further.<\/p>\n Each additional funding source delays the start of construction on a project by an average of four months, adding an extra $20,460 per unit, according to an analysis by the Terner Center for Housing Innovation<\/a> at UC Berkeley.<\/p>\n The Newsom administration is currently tinkering under the hood of California\u2019s affordable housing finance system in an effort to speed things up.<\/p>\n Last year, the governor proposed the creation of the state\u2019s first ever cabinet-level housing agency<\/a>. The California Housing and Homelessness Agency is scheduled to take over the state\u2019s disparate housing loan and grant programs. The governor\u2019s office also proposed legislative language<\/a> that would force the new agency and the Treasurer\u2019s Office to operate in tandem, giving affordable housing developers a single place to apply for the state\u2019s various funding programs \u2014 and to cut out some of the time they spend stuck in line.<\/p>\n Ben Christopher is a reporter with CalMatters.<\/p>\n","protected":false},"excerpt":{"rendered":"The apartment building planned on East Morris Avenue in Modesto is exactly the kind of thing that California\u2019s…\n","protected":false},"author":2,"featured_media":212559,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[380,97669,1843,97670,5037,88,90,89],"class_list":{"0":"post-212558","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-san-jose","8":"tag-affordable-housing","9":"tag-bond-issue","10":"tag-california-legislature","11":"tag-enterprise-community-partners","12":"tag-gov-gavin-newsom","13":"tag-san-jose","14":"tag-san-jose-headlines","15":"tag-san-jose-news"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/212558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=212558"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/212558\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/212559"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=212558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=212558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=212558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}