California Comeback Plan to address homeless crisis

Homelessness in California is on the rise. In fact, the number of homeless individuals in California increased 16% between 2018 and 2019, with more than 21,000 people becoming homeless this year alone. This numerical increase is more than the increase of homelessness in all other states combined, according to the U.S. Department of Housing and Urban Development (HUD).

To combat rising homelessness, the governor recently proposed a $100 billion investment, the California Comeback Plan, which will provide the state with 46,000 new homeless housing units and provide 65,000 people with housing placements. It’s estimated that California has a homeless population of 160,000 in 2020, according to the Senate Housing Committee. California has an estimated 25,000 families with children experiencing homelessness. The plan seeks to end family homelessness in five years.

The plan builds on two previous attempts at providing housing for homeless Californians, Project Roomkey and Project Homekey.

Project Roomkey, established in March 2020, supplied homeless individuals a place to recuperate temporarily with a pathway to permanent housing. Project Homekey followed in July 2020, providing grant funding to convert hotels, motels and vacant apartment buildings into temporary or long-term housing for those experiencing homelessness.

The California Comeback Plan, the state’s most ambitious plan of its kind, expands Project Roomkey and Homekey with $12 billion in grant funding which is comprised of:

• $7 billion for additional Homekey acquisitions;
• $1.75 billion to build thousands of low-income homes;
• $447 million to address student homelessness at public colleges and university campuses; and
• $150 million to stabilize and rehouse Project Roomkey clients.

The plan invests $3.5 billion in ending family homelessness, with:

• $1.85 billion in new housing for homeless families;
• $1.60 billion in rental support and homeless prevention for families; and
• $40 million in grants to local governments.

In addition to the investments for homelessness, the Comeback plan also includes $1.5 billion to transform public spaces and clean public spaces near highways, which will create an estimated 15,000 California jobs.

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Legislative steps toward more affordable housing

The high cost of a shortage of low-income housing

Homelessness stems from a variety of factors. But a lack of access to low-income housing has only exacerbated the problem of homelessness in California.

50% of California’s households cannot qualify to pay the cost of housing in their local market, meaning virtually none of California’s low-income and very-low-income households can qualify for the cost of housing on their own, according to the McKinsey Global Institute. The result is reduced household formation and less money available for each household to spend on goods and services in the local economy.

But without increased residential construction, these additional units remain a dream. The McKinsey report finds that California needs 3.5 million new housing units by 2025 to overcome its housing shortage.

While more housing is constructed every year, today’s level of construction is well below what is needed to meet demand. Compared with the 2005 peak in newly constructed starts, where 154,700 single-family residential (SFR) homes were built, in 2020, a meager 59,000 were completed. Multi-family starts are also down, with 2005 seeing 50,300 newly constructed multi-family starts and 2020 seeing just 47,000.

But a healthy level of construction is still years away. In 2021, builders are cautious as the jobs market has not even come close to recovery. Additionally, the expiration of the foreclosure and eviction moratoriums are looming, which will lead to distressed sales hitting the market and increased vacancies. All this will push home prices down heading into 2022.

To add to the hurdles builders are facing today, restrictive zoning has also made it difficult to build new housing. To get around these barriers, one proposition is to build more infill housing in the form of accessory dwelling units (ADUs).

Yet, these and other efforts to provide low-income housing are often met with vocal resistance from not-in-my-backyard (NIMBY) advocates.

Still, all of these obstacles can be met by government action, and the California Comeback Plan is the largest initiative of its kind in addressing the homelessness epidemic. The creation of new units, whether they be converted from abandoned buildings or newly constructed, is what California desperately needs for the supply to meet the ever-growing demand for housing.

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Construction obstacles cut out low- and mid-income Californians from homeownership