Newsom’s proposed budget cuts $350M from housing programs

After years of record budget surpluses, California now faces a projected $22.5 billion budget deficit, Gov. Gavin Newsom announced last week.

The governor nevertheless struck an optimistic tone. “We’re keeping our promises,” he said at a press conference. He also described the projected deficit, which comes largely as a result of the widespread fall in tech companies’ valuations, as a “modest shortfall.”

But as part of the required adjustment in state spending, Newsom proposed cutting $350 million from housing programs — a hit to one of the governor’s signature issues, at a time when the state is enmeshed in a much larger battle over housing affordability and building rights.

“I always think it’s a mistake to be cutting spending on housing,” said Rafa Sonnenfeld, policy director at YIMBY Law, the San Francisco-based nonprofit, who also cited the importance of the sector’s economic benefit as the state was heading into a possible recession. “But budget decisions are tough and there’s a lot of tough choices.”

The proposed cuts amount to a 12 percent reduction of housing-related general funds compared to last year. Of the $350 million, $300 million would come out of two programs designed to help low and moderate income first-time homebuyers, and $50 million would come out of a program that promotes the construction of accessory dwelling units, or “granny flats.”

The cuts would not necessarily come into effect, however, if the state’s general fund is healthy enough in January 2024.

Newsom’s proposed budget also calls for delays and reductions of more than $450 million toward a state building decarbonization program, or about 9 percent of the total program, as well as a delay of more than $1 billion in spending that was promised for college student housing construction and renovation.

The governor’s proposed budget, which will be negotiated with lawmakers in the coming months, is about 3.5 percent smaller than last year’s budget, which reached a record size in part because of a windfall of stock market-driven tax revenue. The proposal largely kept social services intact but included major cuts to climate and transportation programs, including $2 billion from local rail programs.

Newsom first won election in 2017 on a promise to address the state’s housing crisis by facilitating the construction of 3.5 million homes. He has come nowhere close to that goal, but throughout his tenure his administration has focused heavily on housing policy, signing dozens of laws and helping prompt something of a sea change in California housing development.

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