Governor Newsome Releases 2023-24 Budget Proposal

Summary of Impacts on Housing and Homelessness

Facing a $22.5 billion State budget deficit, Governor Newsom laid out his budget spending priorities on Tuesday January 10th that include a combination of spending cuts, delayed commitments, and shifts to other funding sources. The proposal includes triggers for some of the proposed spending cuts, which would be reversed if budget projections change in a positive direction. The budget proposal does not tap into the rainy-day reserve, which the Governor stated he wanted to preserve in the event of a future economic downturn.

Housing and homelessness continue to be atop the Governor’s concerns, though some programs were impacted, including:

• A reduction of $200 million for the new California Dream for All homeowner downpayment program (leaving it with a $300 million allocation)
• A reduction of $100 million in CalHome funding
• A reduction of $50 million for Accessory Dwelling Units (ADUs)
• A delay of $250 million in funding for a Behavioral Health Bridge Housing Program
• A delay of $1.15 billion in funding for affordable student housing at the State’s colleges and universities, including $250 million for the Higher Education Student Housing Grant Program and $900 million for a student housing revolving loan fund.

The budget proposal leaves intact an additional $3.4 billion in General Funds in Fiscal Year 2023-24 for homeless programs that had been previously announced. These funds include $400 million for encampment resolution grants, $1 billion for the Homeless Housing Assistance and Prevention (HHAP) Program, and funding for rental assistance and temporary housing for people experiencing homelessness or at risk of homelessness. These funds will be conditioned on compliance with State housing law and submittal of acceptable local action plans that detail how the funds will be used and how homelessness will be reduced.

Other key points outlined in the Governor’s proposal included:

• A goal of creating 2.5 million new homes throughout the State by 2030 (down from the 3.5 million announced previously). Of the 2.5 million, one million would be affordable to lower- and moderate-income households.
• The intent to enact legislation to amend the HHAP program to prioritize encampment clean ups, provide operational stability for the Homekey Program, and support housing provided through the Community Assistance, Recovery and Empowerment (CARE) Act. Additionally, the anticipated legislation would add new requirements for jurisdictions receiving HHAP funds, requiring that they provide new detail on expenditures and outcomes.
• A continued commitment to identifying administrative and statutory barriers to housing development with a focus on housing for extremely low-income families and permanent supportive housing.

Note that the release of the Governor’s spending priorities kicks off the annual budget process for the fiscal year beginning on July 1, 2023. In May, the Governor will release the May Revise, which will include updated revenue forecasts and will likely result in changes to the recommended funding amounts included in his January proposal. The Legislature has until June 15th to pass a budget and move it to the Governor’s desk for action, with budget hearings typically beginning in February. The Governor has until July 1, 2023 to sign the budget bill. It is expected that a lot will change between January and July. LeSar will keep you updated along the way.