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Costly California supportive housing would need $150 billion to end homelessness

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(The Center Square) – California voters approved $2 billion in 2018 to build 20,000 supportive housing units for the homeless. Five years later, only 1,797 units have been completed, CalMatters reports, a pattern reflected across the state’s efforts to build homelessness and mental health infrastructure. Will Governor Gavin Newsom’s Proposition 1 be the same?

On March 5, California will vote on Proposition 1, which aims to fund 11,150 new behavioral health beds, 26,700 outpatient treatment slots, and $1 billion of veterans’ housing, and would require counties to redirect 30% of their mental health funding to housing programs. With a yield of 3.3%, what the state secured on its most recent general obligation bond issuance, the $6.4 billion bond would cost $6.3 billion in interest over 30 years, or $12.7 billion.

2018’s No Place Like Home ballot measure is similar to Proposition 1 in that it diverted some of the roughly $2 billion from the state’s 1% tax on income from over $1 million meant for mental health to homeless supportive housing units. Originally supposed to fund 20,000 units, the program estimates a future yield of only 7,702 units. At the current annual completion rate of approximately 360 units, it will take 16.5 years — until 2040 — to build the remaining NPLH units.

Rising interest rates and construction costs mean developers need to find more non-NPLH funding. Because of reliance on multiple city, state, and federal programs, applications for funding often expire and need to be re-approved, adding more development time. Local opponents also use state environmental regulations, such as the California Environmental Quality Act, to hold projects in limbo for years through court challenges.

According to the 2023 NPLH report, $1.91 billion has been awarded by the program, with 6,406 units receiving NPLH funding. Even if the full 7,702 units are ultimately funded, that’s still approximately $250,000 in funding per unit. With CalMatters estimating NPLH only covers approximately 10% of a project’s costs, even generously assuming NPLH covers half of a single unit’s construction means each NPLH unit costs taxpayers at least $500,000 to build.

UC Berkeley’s Terner Center estimates the average supportive housing unit’s operating costs are $17,000 per year, so including 20 years of support required for each NPLH unit drives per-unit costs up another $340,000 — to $840,000. This means NPLH’s 7,702 units will likely cost taxpayers over $6.5 billion over the next 20 years, not including interest on public debt.

Similarly, Los Angeles’ 2016’s Measure HHH authorized $1.2 billion for local supportive housing units, with just 6,507 built. According to the city controller, “Fourteen percent of the units in construction exceed $700,000 per unit, and one project in pre-development is estimated to cost almost $837,000 per unit.”

At NPLH unit costs, it would cost over $152 billion over 20 years to house the state’s 181,000 homeless individuals in supportive housing units.

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