The 2019-20 Budget: Considerations for Governor's Proposals to Address Homelessness

The 2019-20 Budget: Considerations for Governor’s Proposals to Address Homelessness GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 2019 Summary The state’s severe affordable housing crisis puts low-income Californians at greatest risk of housing instability and homelessness. For these households, job loss or an unexpected expense could result in homelessness. The 2019-20 Governor’s budget includes various proposals aimed at addressing homelessness. Specifically, the Governor proposes (1) planning and production grants to local governments, (2) expanding the Whole Person Care (WPC) pilot programs, and (3) funding the Housing and Disability Advocacy Program (HDAP) on an ongoing basis. While there is no obvious right answer as to how the Legislature should address the state’s homelessness crisis, the Governor’s interest in investing state resources to bolster short-term solutions— such as emergency shelters—is reasonable. These efforts can provide immediate relief while recent investments in permanent supportive housing for the homeless ramp up. On the other hand, the Governor’s proposal to reward communities for developing shelters with flexible funding may not produce the desired results. We urge the Legislature to consider alternative uses of these funds that would yield more certain benefits for homeless individuals. Furthermore, given the conceptual nature of many of the Governor’s homelessness proposals, we highlight key questions the Legislature should ask the administration as it considers the merits of the proposals, including (1) how the administration will allocate grant funds and (2) what milestones the administration will use to evaluate local governments’ programs to develop shelters. BACKGROUND California Has a Disproportionate Homeless Population. California has more people experiencing Housing Affordability Affects Homelessness. homelessness than any other state in the nation. As of The state is facing a severe affordable housing crisis. January 2018, California has about 130,000 homeless Not surprisingly, those living in poverty are the most individuals, which represented about 25 percent of the significantly affected. Rising housing costs that have total homeless population in the nation. (California’s exceeded growth in wages, particularly for low-income overall population, however, is about 12 percent of households, put Californians at risk of housing instability the nation.) Of California’s homeless population, about and homelessness. Those who pay at least half of their 21,000 are families with children, 11,000 are veterans, income toward housing are at greatest risk. In California, and 12,000 are unaccompanied young adults (aged this applies to 1.5 million low-income households. For 18-24). Across these groups, 33,000 are individuals this population, job loss or an unexpected expense could experiencing chronic homelessness. result in homelessness. analysis full gutter 2019-20 BUDGET Various Government Programs Help homelessness. Of this amount, $100 million is Alleviate Homelessness. Federal, state, and local set aside for the 11 most populous cities in the government programs aim to assist those who state. The remaining funding would be available are homeless or at risk of becoming homeless for Continuums of Care (CoC)—local entities that by: (1) funding construction and rehabilitation of administer housing assistance programs within a housing and shelter for homeless individuals and particular area, often a county or group of counties. families; (2) helping homeless individuals and Provides Funding for Jurisdictions Meeting families pay for the cost of housing or temporary Shelter and Housing Development Milestones. shelter; and (3) providing cash assistance, mental The Governor’s Budget also proposes making a health and substance abuse treatment, and other one-time $200 million General Fund appropriation services. Various state entities participate in available for cities and counties as a reward to the administration of these programs, including communities that show progress toward developing the Departments of Housing and Community shelters and housing for the homeless, based on Development, Veterans Affairs, Social Services, and grants made available in the proposal above. As Health Care Services, as well as the California Tax a community makes progress, it would receive a Credit Allocation Committee, California Housing portion of the $200 million, which it could use for Finance Agency, and Homeless Coordinating any purpose. and Financing Council. Historically, cities and WPC Pilot Programs. The Governor’s budget counties have provided most of the homelessness proposes a one-time $100 million General Fund assistance in their jurisdiction, relying in part on augmentation for WPC pilots—with the funds federal and state funding. As the homelessness available until July 2025—to fund housing and crisis has become more acute, the state has supportive services for individuals who are taken a larger role in funding and supporting local homeless or at risk of homelessness, focusing governments in these efforts. on the mentally ill. (These state funds would not drawdown additional federal funding.) WPC pilots OVERVIEW OF THE GOVERNOR’S are currently authorized under the state’s federal HOMELESSNESS PLAN Medicaid waiver that allows for community-based initiatives that coordinate health, behavioral health, In the 2019-20 January budget, the Governor and social services for Medi-Cal beneficiaries, but includes various proposals aimed at addressing restricts the types of housing assistance eligible for homelessness. These proposals are largely federal funding. These existing pilots are funded conceptual and no details were included in the with federal funding and local matching funds. The trailer bill legislation released by the administration Governor’s proposal introduces state funding for in early February. We understand the administration the program, which could be used to fund a wider is developing additional legislation related array of housing and housing-related services. to its homelessness plan that could provide Provides Ongoing Funding for HDAP. The further information about the Governor’s vision. Governor proposes an ongoing appropriation of Below, we describe the Governor’s proposals to $25 million General Fund beginning in 2019-20 to date. Figure 1 summarizes the Governor’s key permanently establish HDAP. The program was homelessness proposals in the 2019-20 budget. established in 2017 as a temporary county match Provides Grants for Regional Homelessness program to assist homeless, disabled individuals Planning. The budget proposes $300 million with applying for disability benefit programs, one-time General Fund for communities to including the Supplemental Security Income/ expand or develop emergency shelters, navigation State Supplementary Payment (SSI/SSP), while centers, and supportive housing. In order to be also providing housing supports. The program eligible for this grant, communities are required to includes outreach, case management, benefits develop regional plans with neighboring cities and advocacy, and housing supports to all program counties that coordinate their efforts to address participants. Participating counties are required to 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET match any state funds on a dollar-for-dollar basis. procedural requirements give development The 2017-18 Budget Act included one-time funding opponents significant opportunities to continue of $45 million General Fund, available over three challenging housing projects after local years, for this program. (While the authorizing governments have approved them. This level legislation in 2017 required the administration to of environmental review for private housing report by October 2018 on key metrics assessing development is uncommon among other HDAP’s performance—including how much states in the nation. Only four other states counties received in federal reimbursements once have comparable requirements. The Governor participating individuals successfully transitioned intends to propose legislation to accelerate the from the county general cash assistance program construction of homeless shelters, navigation to SSI/SSP—the administration indicates that centers, and new supportive housing units by data collection challenges have prevented it from allowing for a streamlined CEQA process with complying with the reporting requirement.) accelerated judicial review of challenges to an Other Homelessness Proposals. The Governor environmental impact analysis. also introduces other proposals intended to • Using “Airspace” for Emergency Shelters. address homelessness. The Governor intends to develop a statewide policy for the use of California Department • Streamlining California Environmental of Transportation (CalTrans) airspace for Quality Act (CEQA). The CEQA process emergency shelters. Airspace is the area requires local governments to conduct a under bridge structures and viaducts, as well detailed review—an environmental impact as other CalTrans property used to support analysis—of the potential environmental the state’s transportation system that could effects of new housing construction (and be used for other purposes. While some most other types of development) prior to cities, such as Oakland, have individually approving it. The information in these reports contracted with CalTrans to lease airspace for sometimes results in the city or county denying the development of emergency shelters, this proposals to develop housing or approving proposal would develop a statewide policy for fewer housing units than the developer the use of airspace. proposed. In addition, CEQA’s complicated Figure 1 Governor’s 2019‑20 Homelessness Proposals (In Millions) Proposal Description General Fund Planning grants for homelessness Provides grants to local governments to expand or develop $300 emergency shelters, navigation centers, and supportive housing. Production grants for homelessness Provides general purposes funds to local governments as 200 a reward for making progress toward developing shelters and housing for the homeless. Whole Person Care pilot programs Provides housing and supportive services to individuals 100 who are homeless or at risk of homelessness, focusing on the mentally ill. Housing and Disability Advocacy Assist homeless, disabled individuals with applying for 25 Program disability benefit programs, including Supplemental Security Income/State Supplementary Payment. Total $625 www.lao.ca.gov 3 analysis full gutter 2019-20 BUDGET ISSUES FOR Prior Investments in Short-Term Homelessness Assistance Showing Promise, LEGISLATIVE CONSIDERATION but Need Remains. The 2018-19 budget provided In this section, we provide the Legislature with $500 million one-time General Fund to establish issues for its consideration as it deliberates the the Homelessness Emergency Aid Program (HEAP). Governor’s homelessness proposals. Eligible cities and CoCs can use the funds for a variety of short-term housing solutions for the Different Approaches to homeless, such as shelters and rapid rehousing. Addressing Homelessness Cities and CoCs have begun to receive funding available through HEAP and have indicated to the There are a variety of approaches for assisting state how they intend to use the funds to provide homeless individuals and families. Each type of relief for the homeless in their communities. assistance has pros and cons. None is obviously Approaches include: capital improvements for superior to the others in all respects. Some housing and shelters; direct delivery of services, approaches—such as rapid rehousing (short-term such as health education; and rental assistance rent assistance, moving cost assistance, or programs. Despite these efforts, significant demand help with housing search) or shelters—tend to for short-term homelessness assistance remains. be cheaper, can be deployed more quickly, and In addition to leading the nation with the highest have lower barriers of entry for participants. The number of homeless individuals, California has downside of these approaches is that they tend the highest proportion (69 percent) of unsheltered to offer only a temporary solution. This means homeless individuals of any state in the nation. that recipients may be more likely to fall back This indicates a demand for additional short-term into homelessness. More permanent solutions assistance. The Governor’s proposal helps address include long-term rent assistance and supportive this unmet demand, which could cost $2 billion to housing. With these approaches, recipients receive $3 billion annually to fully address. assistance as long as they need it (as long as their Reasonable to Invest in Short-Term income remains below certain levels). Long-term Assistance. While there is no obviously right rent assistance tends to be more expensive than answer as to how the Legislature should balance rapid rehousing. Similarly, supportive housing the short- and long-term approaches for addressing construction tends to require significant upfront homelessness we mentioned above, the approval costs. Supportive housing also typically takes of NPLH by voters opened up a sizeable amount of years to site and build. Balancing out the higher funding for construction of permanent supportive costs and long implementation time is the fact that housing. In this case, it might make more sense to recipients of these programs are less likely to fall focus one-time funds on short-term assistance— back into homelessness. such as shelters—for which much less funding Voter Approval of No Place Like Home is available and considerable demand remains. Represents Significant Investment in Long-Term As compared to additional funding for supportive Homelessness Solution. Voter approval of housing—which would take years to result in new Proposition 2 in 2018 authorized the use of funds housing units—allotting funding for short-term from the Mental Health Services Act, which taxes assistance would help move more people out income above $1 million, for No Place Like Home of homelessness in the near term while NPLH is (NPLH). The Legislature created NPLH in 2016 to ramping up. build and rehabilitate permanent supportive housing for those with mental illness who are homeless or at-risk of becoming homeless. Proposition 2 allowed for the issuance of $2 billion in bonds for this purpose. 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET Additional Considerations Key Implementation Issues Unclear How Local Governments Will Key Questions Surrounding Homelessness Respond to Flexible Funding Rewarding Shelter Proposals Remain. Given the conceptual nature Development. The state has tried to encourage of many of the Governor’s major homelessness communities to build affordable housing by offering proposals, we highlight key questions the financial rewards in the past. While it is difficult Legislature might want to ask the administration as to rigorously evaluate these incentive programs it considers the merits of the requests. given their design, we outline in The 2019-20 • How Will the Administration Allocate Grant Budget: What Can Be Done to Improve Local Funding? The administration proposes Planning For Housing? that they have not resulted allocating the grant funding among CoCs in a notable increase in housing construction. and the most populous cities in the state. It is unclear to us whether local governments Deciding how specifically to allocate the would respond any differently to the Governor’s funding among these entities can be difficult proposal for $200 million General Fund encouraging and contentious. There are many factors that constructing of shelters. Therefore, this component could be considered (for example, current of the Governor’s proposal would be risky and the and past numbers of homeless persons, Legislature could not be sure what effect, if any, the composition of homeless population, housing funds would have on the development of shelters in costs, or poverty rates) and many reasonable the state. There are alternative uses of these funds approaches that can and have been used. that would yield more certain benefits. For example, Picking one approach over another inevitably providing $200 million to construct shelters would benefits some communities over others. This almost certainly yield over 6,000 new beds for conflict is unavoidable. The administration the homeless. Given the uncertain benefits of the should specify its allocation methodology. Governor’s proposal, we recommend the Legislature • What Milestones Will the Administration not appropriate $200 million for one-time rewards Use to Evaluate Local Governments’ for local governments. However, if the Legislature Progress? The administration could evaluate were to decide to move forward with this proposal, communities based on specific actions, such our aforementioned report offers recommendations as zoning land to allow for emergency shelter on how the state could structure the program to development, or based on outcomes, such as allow for a more rigorous evaluation of its outcomes. opening a specific number of beds in new or CEQA Streamlining Deserves Serious expanded shelters. Consideration. Given the magnitude of the state’s • How Will the State Administer the homelessness problem, the Legislature should take Augmentation to the WPC Pilot Program? a comprehensive approach that addresses the In particular, the administration should explain problem from multiple angles. The legal challenges (1) local matching requirements for the that opponents can bring through the CEQA additional funds; (2) eligibility requirements process means that a single individual can slow for WPC pilot participants; and (3) how state or terminate a development project approved by funds will expand, rather than supplant, the local government and broadly supported by existing federal and local funding for the the community. In light of this impendent to the program. Additionally, the administration development of emergency shelters, the Governor’s should explain how the services offered proposal deserves serious consideration. through the WPC pilots would interact Additionally, this proposal is in line with previous with similar housing support programs for action by the Legislature to streamline CEQA for individuals with mental illness, such as NPLH. specific projects or types of projects. Refer to our March 2015 report, California’s High Housing • What Is the Rationale for Permanently Costs: Causes and Consequences, to learn more Establishing HDAP? The 2017-18 budget about how CEQA affects development. appropriated funds over three years to www.lao.ca.gov 5 analysis full gutter 2019-20 BUDGET pilot the HDAP program. Funding for CONCLUSION HDAP remains available in 2019-20. The state’s severe affordable housing crisis The administration should explain what puts Californians at risk of housing instability and experience from the pilot justifies permanently homelessness. For the state’s lowest-income establishing HDAP in 2019-20 when the initial households, job loss or an unexpected expense funding still remains available for the program. could result in homelessness. California has more Additionally, the administration should explain people experiencing homelessness than any other why it prioritized providing additional funds state in the nation. While there is no obvious right to HDAP while funding for other housing pilot answer as to how the Legislature should address programs that have demonstrated positive this crisis, the Governor’s interest in investing outcomes and are set to expire in 2019-20 state resources to bolster short-term solutions— are not continued, such as Bringing Families such as emergency shelters—is reasonable. Home. If the Legislature decides to move These efforts can provide immediate relief while forward with this proposal, the administration recent investments in permanent supportive should address how a permanently housing for the homeless ramp up. However, the established HDAP would be administered. Governor’s proposal to reward communities with Specifically, (1) how will the program measure flexible funding is risky. We urge the Legislature success given the data collection challenges to consider alternative uses of these funds that the administration has faced in the pilot, would yield more certain results. Furthermore, (2) which counties will be eligible for additional given the conceptual nature of many of the HDAP funding, (3) whether the funds will be Governor’s homelessness proposals, we highlight made available through a competitive process key questions the Legislature should ask the or set allocations, and (4) whether counties administration as it considers the merits of the would be required to match state funding. proposals. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2019-20 BUDGET www.lao.ca.gov 7 analysis full gutter 2019-20 BUDGET LAO PUBLICATIONS This report was prepared by Lourdes Morales and reviewed by Brian Uhler and Carolyn Chu. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 8 LEGISLATIVE ANALYST’S OFFICE