The Give And The Take

6 min read

California and Florida go in opposite directions    

Many states have affordable housing trust funds. But how—or even if—they use that money on housing can depend on the political whims of voters and lawmakers. The divergence has been on display recently in California and Florida. This past November, voters in the Golden State voted on three ballot measures in such a way as to encourage affordable housing construction in a state with a shortage. Two of the measures will allocate money for affordable homebuilding, while the third will uphold laws that fend off rent control. In Florida, by contrast, an existing trust fund that was meant to pay for affordable housing has routinely been raided for other spending purposes. The results of the state’s gubernatorial election recount may determine whether or not this practice continues. Here’s a look at the situation in both states.

The affordable housing industry indeed has much to celebrate in the latest California ballot votes. There were two propositions—Prop 1 and Prop 2—that will increase the state’s affordable housing stock. Prop 1, called the Housing Programs and Veterans’ Loans Bond, was approved on a 54 percent yes vote. It authorizes $4 billion in bonds for housing-related programs, loans, grants and projects for veterans. The largest chunk of that ($1.5 billion) will be loans for the construction and rehabilitation of units, which serve veterans making 60 percent or less of area median income (AMI). The California Legislative Analyst’s Office (CLAO) estimates that the measure will help 55,000 families.

Prop 2, called the Use Millionaire’s Tax Revenue for Homelessness Prevention Housing Bonds Measure, passed on a 62 percent yes vote. It allows the state to use revenue from a previous proposition to pay $2 billion in bonds for projects that house the mentally ill homeless. The specific revenue leveraged will be a one percent tax on income above $1 million. The proceeds, some of which will be held in trusts, will fund an estimated 20,000 supportive units. This will put at least somewhat of a dent in a statewide homeless population that has now risen to 134,000.

A third housing-related ballot measure, Prop 10, received a 61 percent no vote. The measure, had it passed, would’ve repealed the Costa-Hawkins Rental Housing Act, which prevents California cities from imposing rent control on housing first occupied after 1995. Prop 10 was actually supported by many tenant and affordable housing activists, but opposed by the real estate industry, since it would allow cities to apply rent control to new units, raising concerns—long echoed by economists—that this would discourage new construction. The defeat of Prop 10, mixed with the victorious Props 1 and 2, will ensure that more housing of all price levels gets built in California.

Which is important, because California needs a lot more of it. According to Politifact, it has the second lowest housing units per capita, trailing only Utah (which is likely first because of religion; Mormons have large families). The CLAO estimates that the housing shortage in California will increase by 90,000 units annually, and that if this figure were multiplied over the decades, the backlog by 2010 would’ve reached a whopping 2.7 million units. Of course, it only gets worse with time – in 2017, the entire state added just 98,000 units. By comparison, metro Houston and Dallas combined for 105,000. The three ballot measures were a reaction to this obvious statewide shortage.

In Florida, affordable housing politics are a different story. The state already has the Sadowski Housing Trust Fund, which was enacted in 1992 to create a dedicated revenue source for affordable housing. It’s funded by a one percent documentary stamp tax paid on all real estate transactions. The fund usually collects several hundred million annually, and, according to a Miami Herald report, has collected $1.87 billion since the start of the recession.

There are no legal requirements, however, that this fund must be spent on housing. And so it isn’t. Since that recession, nearly $1.3 billion of the $1.87 billion has been diverted by Florida lawmakers for other priorities.

“Part of the reason,” says Jeff Branch, a legislative advocate for the Florida League of Cities, “is that the state constitution requires balanced budgets.” So when some event causes a budgetary disruption—recessions, major hurricanes, etc.—the money gets redirected. In the most recent case this year, the state’s public schools needed money to bolster their security after the school shooting in Parkland.

“But increasingly,” continues Branch, “the fund has become play money that specific lawmakers use for their pet priorities. And because the money is redirected into the general fund, it’s sometimes unclear what the alternative spending priorities even are.

“Some years,” says Branch, “we have a budget surplus and they still sweep the fund. So it’s not like they’re using the fund to fill holes.”

This means that cities get a fraction of the Sadowski Trust Fund money, making it difficult for them to plan. In 2017, Republican state senator Kathleen Passidomo, in response to Gov. Rick Scott’s new budget, proposed legislation, SB 874, that would outlaw the sweeps. But this past March, the bill, despite bipartisan support, died in subcommittee.

Branch says that the results of Florida’s recent gubernatorial race could determine whether or not these sweeps continue. New governor Ron DeSantis hasn’t taken a position on the issue.

The situation in Florida shows the tenuous nature of housing trust funds, which can be subject to both political and budgetary whims. During the recession, Arizona was, like Florida, hit hard by the subprime mortgage crisis. Legislators responded by capping the amount that could be appropriated into the housing trust fund. In 2012, California closed its redevelopment agencies, cutting off much of the state’s affordable housing money. Even at the federal level, the National Housing Trust Fund was nearly cut by the Trump administration just one year after it became fully operational (HUD eventually released $219 million for the fund in 2018). And there are many other examples showing that such trusts and programs are never truly safe. Right now those battles are playing out differently in Florida and California.