The 2020-21 Spending Plan:

Housing and Homelessness

In January, Governor Proposed Change to State Approach for Addressing Homelessness. In January, the Governor proposed $750 million General Fund in one-time funding to the California Access to Housing and Services (CAAHS) Fund he established through executive order within the Department of Social Services (DSS). The administration indicated that the primary goal of the fund would be to help alleviate street-based homelessness and increase the state’s number of housing units. The Governor’s proposal called for DSS to award the funds through performance-based contracts with “regional administrators” which could include nongovernmental entities such as nonprofits. The establishment of the CAAHS Fund at DSS and the introduction of regional administrators reflected a departure from the state’s recent approach towards addressing homelessness. Specifically, the past two budgets relied on the Homeless Coordinating and Financing Council (HCFC) to award homelessness funds directly to local governments and Continuums of Care (CoCs), affording them substantial control over the use of funds in a manner that served their communities. The Governor’s proposal deviated from this model and would have complicated state-level homelessness funding and coordination through the inclusion of a new entity—DSS. For our analysis of the Governor’s proposal, please see our February 2020 report The 2020‑21 Budget: The Governor's Homelessness Plan.

Emergence of COVID-19 Significantly Altered State’s Approach. In March, the state’s public health and economic situations began to change dramatically because of the emergence of the coronavirus disease 2019 (COVID-19). While the Governor and Legislature remained committed to addressing the state’s housing and homelessness challenges, the strategies to address these issues evolved given the state’s fiscal constraints and immediate needs. The Governor ultimately withdrew his proposal for the CAAHS Fund as part of the May Revision. Below, we discuss how COVID-19 changed the state’s approach and discuss the major budget and policy actions related to housing and homelessness.

Emergency Budget Actions Related to Housing and Homelessness. In March, the Governor declared a state of emergency related to COVID-19 and the Legislature passed Chapter 2 of 2020 (SB 89, Committee on Budget and Fiscal Review), which authorized the administration to spend up to $1 billion General Fund to begin addressing costs incurred as it responded to COVID-19. In particular, the state dedicated $150 million of the $1 billion in emergency funding to help address some of the immediate needs of people experiencing homelessness.

• $50 Million to Address Immediate Housing Needs Through Project Roomkey. At the outset of the COVID-19 public health emergency, the state provided $50 million General Fund for the newly established Project Roomkey. The program helped local governments lease hotels and motels to provide for the immediate housing needs of vulnerable individuals experiencing homelessness that were at risk of contracting COVID-19. Overall, the goal of this effort was to provide non-congregate shelter options for people experiencing homelessness, to protect human life, and minimize strain on the state’s health care system. The program was administered by DSS. Subsequently, the state used a portion of its federal Coronavirus Relief Fund (CRF) allocation to completely offset the General Fund Costs for Project Roomkey. In November 2020, the administration announced an additional $62 million one-time funding for Project Roomkey, this time from the state’s Disaster Response-Emergency Operations Account. This additional funding is intended to mitigate against the eviction of individuals living in Project Roomkey units when CRF funding expires December 30, 2020.

• $100 Million to Local Entities to Help Support Their Homeless Populations. In addition, the state authorized $100 million General Fund directly to cities, counties, and CoCs for shelter support and emergency housing to address COVID-19 among the homeless population, administered by the Business, Consumer Services and Housing Agency. These efforts were intended to help prevent and contain the spread of COVID-19. These funds were distributed based on methodology established as part of the 2019‑20 budget for the Homeless Housing, Assistance and Prevention (HHAP) Program.

Budget Provides $800 Million for Project Homekey and Related Services. As we mentioned earlier, the state provided $50 million for the newly established Project Roomkey at the outset of the COVID-19 pandemic. Building off Project Roomkey, the 2020‑21 budget provides $550 million of the state’s direct allocation of CRF for the newly established Project Homekey. Project Homekey provides for the acquisition of hotels, motels, residential care facilities, and other housing that can be converted and rehabilitated to provide permanent housing for persons experiencing homelessness or at risk of homelessness, and who also are impacted by COVID-19. Unlike Project Roomkey, Project Homekey is administered through the Department of Housing and Community Development. The department will provide grants to local governments to acquire these facilities, which will be owned and operated at the local level. The 2020‑21 budget also provides an additional $50 million General Fund for the acquisition, conversion, rehabilitation, and operation of Project Homekey sites. In addition, the Legislature and the administration reached an agreement using the Control Section 11.90 process in October 2020 to redirect an additional $200 million in CRF to Project Homekey. The budget previously assumed that this funding would have been used to offset General Fund costs related to COVID-19. Finally, associated trailer bill language provides exemptions to the California Environmental Quality Act and local zoning restrictions to expedite the acquisition of Project Homekey sites prior to the December 30, 2020 deadline to expend CRF funds.

Budget Provides $300 million for One-time Continuation of HHAP Program. The 2019‑20 budget provided $650 million for one-time grants to cities, counties, and CoCs to fund a variety of programs and services that address homelessness through the HHAP program. The 2020‑21 budget provides an additional $300 million General Fund for a one-time continuation of HHAP. Specifically, the budget makes $130 million available for cities with populations of 300,000 or more, $90 million available for CoCs, and $80 million available for counties. To receive funds, the eligible entities must provide a plan to HCFC describing how they have coordinated, and will continue to coordinate, with other local agencies to address homelessness in their region. The funding may be used to operate Project Homekey sites and for evidence-based housing solutions, including rapid rehousing, rental subsidies, and subsidies for new and existing housing and emergency shelters.

Maintains $500 Million Increase for Expanded Low-Income Housing Tax Credit. The budget authorizes the award of $500 million for the state’s low-income housing tax credit program, which provides tax credits to builders of rental housing affordable to low-income households. This action authorizes an additional year of the tax credit that was originally provided in 2019‑20 for 2020‑21. This additional tax expenditure brings total credits to $1 billion across the past two years. Associated trailer bill language specifies that prior to awarding the tax credits, the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee must adopt policies to align the programs of both committees in a way that increases affordable housing production and contains costs.

Allocates $331 Million From National Mortgage Settlement. In 2012, California entered into a national multistate settlement with the country’s five largest loan servicers. The budget allocates funds from that settlement, the National Mortgage Settlement. The budget allocates $300 million to be administered by the California Housing Finance Agency for (1) housing counseling services certified by the federal Department of Housing and Urban Development to homeowners, former homeowners, or renters and (2) mortgage assistance to qualified households. In addition, the budget allocates $31 million for qualified legal services projects and support centers to provide eviction defense or other tenant defense assistance in landlord-tenant disputes.

Additional Budget Actions Related to Housing and Homelessness. The budget makes various spending reductions, deferrals, and special fund loans subject to federal “trigger” language in the budget. This includes a $200 million reduction related to the infill infrastructure grant program and a $45 million reduction related to the funding for moderate-income housing. Lastly, the budget accelerates the awarding of previously authorized infill development funding by $103 million for a total of $160 million in the budget year.

Key Housing and Homelessness Policy Changes Following Emergence of COVID-19. In an effort to avert a worsening of the state’s housing crisis due to the financial hardships facing Californians because of COVID-19, the Governor, Judicial Council, and Legislature adopted various policies related to housing and homelessness. Below, we summarize the key policy actions.

• Governor’s Executive Orders. Since March 2020, the Governor has issued various executive orders related to housing and homelessness following the emergence of COVID-19. For example, the Governor suspended state laws that limit local governments’ ability to establish local policies that limit evictions and foreclosures. The Governor also prohibited the enforcement of eviction orders for renters affected by COVID-19.

• Emergency Rules Adopted by Judicial Council Postponed Eviction and Foreclosure Court Proceedings. In April, the Judicial Council adopted various emergency rules that affected various types of court proceedings statewide. In particular, the Judicial Council adopted rules that generally prohibited the courts from taking actions related to eviction or foreclosure proceedings. In effect, the rules placed a pause on new evictions and foreclosures. However, local governments were able to enforce evictions that the court had previously authorized. Generally, the rules strengthened the eviction protections advanced by the Governor through various executive orders earlier in the COVID-19 emergency. The rules remained in effect through September 1, 2020.

• Legislative Protections for Tenant, Homeowner, and Small Landlords. The Tenant, Homeowner, and Small Landlord Relief and Stabilization Act of 2020 (Chapter 37 of 2020 [AB 3088, Chiu]) took effect immediately following the expiration of the Judicial Council rules to provide protections against evictions and foreclosures. Under the legislation, no tenant can be evicted before February 1, 2021 as a result of rent owed due to a COVID-19-related hardship experienced between March 4 and August 31, 2020, if the tenant provides a declaration of hardship within the legislation’s time lines. For a COVID-19-related hardship that occurs between September 1, 2020 and January 31, 2021, tenants must also pay at least 25 percent of the rent due to avoid eviction. Tenants are still responsible for paying unpaid rents to landlords, but those unpaid amounts cannot be the basis for an eviction. Landlords may begin to recover this debt on March 1, 2021, and small claims court jurisdiction is temporarily expanded to allow landlords to recover these amounts. Landlords who do not follow the court evictions process will face increased penalties under the legislation. The legislation also provides various protections to small landlords, including extending anti-foreclosure protections in the Homeowner Bill of Rights to small landlords.