Governor Newsom released his January budget proposal today, forecasting a $37.9 billion budget shortfall and proposing $8.5 billion in “belt tightening” measures that include cuts to key affordable housing programs—including the “enhanced” $500 million Low Income Housing Tax Creditthe state has supported every year since it was created in 2019. The Governor has proposed maintaining the existing $120 million LIHTC program.

In addition to scaling back housing tax credits, the Governor has proposed cutting an additional $1.2 billion from programs that support the production and preservation of affordable housing. Programs facing cuts include: 

• Multifamily Housing Program (MHP): The Governor proposes cutting $250 million while leaving $75 million in the 2023-24 budget. 

• Infill Infrastructure Grant Program (IIG): The Governor proposes cutting $200 million and leaving $25 million in 2023-24 for this purpose.

• CalHome Program: The Governor proposes cutting $152.5 million.

• Veteran Housing and Homelessness Prevention Program (VHHP): The Governor proposes cutting $50 million.

While acknowledging this year’s gloomy budget picture, the Governor expressed confidence in the state’s multi-year budget outlook, noting that a significant portion of this year’s budget shortfall is due to faulty revenue projections last year caused by the extension of tax filings. The Governor has proposed drawing down the state’s rainy day fund and budget reservesby $13.1 billion and borrowing, shifting, or deferring another $16.3 billion to balance the budget. 

Ray Pearl statement on the Governor’s January budget proposal:

“California continues to face a growing affordable housing and homelessness crisis, and in spite of the state’s uncertain fiscal situation, now is not the time to reduce commitments to building and preserving the affordable homes Californians desperately need.” 

“In his budget presentation today, the Governor reiterated that his January budget is just the beginning of a months-long negotiation between his Administration and the Legislature over the state’s spending priorities, and CHC will certainly be active in urging state leaders to maintain support for critical affordable housing programs. This includes restoring the $500 million enhanced Low Income Housing Tax Credit, the state’s most successful tool for promoting the development of affordable housing.”

“The state’s challenging budget environment also highlights the critical importance of placing a substantial new affordable housing bond, AB 1657 (Wicks), on the November ballot to maintain stable funding for housing programs in the years ahead.”

“Californians need affordable homes—and a lot more of them. We urge state leaders to work with CHC and our partners to keep building them, in every community.”