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live). Around one-quarter (roughly 800,000) of <br />low-income households live in subsidized affordable <br />housing or receive housing vouchers. Most <br />households receive no help from these programs. <br />Those that do often find that it takes several years to <br />get assistance. Roughly 700,000 households occupy <br />waiting lists for housing vouchers, almost twice the <br />number of vouchers available. <br />Majority of Low-Income Households Spend <br />More Than Half of Their Income on Housing. <br />Around 1.7 million low-income renter households <br />in California report spending more than half of <br />their income on housing. This is about 14 percent <br />of all California households, a considerably higher <br />proportion than in the rest of the country (about <br />8 percent). <br />CHALLENGES OF EXPANDING EXISTING PROGRAMS <br />One possible response to these affordability <br />challenges could be to expand existing housing <br />programs. Given the number of households <br />struggling with high housing costs, however, this <br />approach would require a dramatic expansion <br />of existing government programs, necessitating <br />funding increases orders of magnitude larger <br />than existing program funding and far-reaching <br />changes in existing regulations. Such a dramatic <br />change would face several challenges and <br />probably would have unintended consequences. <br />Ultimately, attempting to address the state’s <br />housing affordability challenges primarily through <br />expansion of government programs likely would be <br />impractical. This, however, does not preclude these <br />programs from playing a role in a broader strategy <br />to improve California’s housing affordability. <br />Below, we discuss these issues in more detail. <br />Expanding Assistance Programs <br />Would Be Very Expensive <br />Extending housing assistance to low-income <br />Californians who currently do not receive it—either <br />through subsidies for affordable units or housing <br />vouchers—would require an annual funding <br />commitment in the low tens of billions of dollars. <br />This is roughly the magnitude of the state’s largest <br />General Fund expenditure outside of education <br />(Medi-Cal). <br />Affordable Housing Construction Requires <br />Large Public Subsidies. While it is difficult to <br />estimate precisely how many units of affordable <br />housing are needed, a reasonable starting point is <br />the state’s current population of low-income renter <br />households that spend more than half of their <br />income on housing—about 1.7 million households. <br />Based on data from the LIHTC, housing built for <br />low-income households in California’s coastal <br />urban areas requires a public subsidy of around <br />$165,000 per unit. At this cost, building affordable <br />housing for California’s 1.7 million rent burdened <br />low-income households would cost in excess of <br />$250 billion. This cost could be spread out over <br />several years (by issuing bonds or providing <br />subsidies to builders in installments), requiring <br />annual expenditures in the range of $15 billion <br />to $30 billion. There is a good chance the actual <br />cost could be higher. Affordable housing projects <br />often receive subsidies from more than one source, <br />meaning the public subsidy cost per unit likely is <br />higher than $165,000. It is also possible the number <br />of units needed could be higher if efforts to make <br />California’s housing more affordable spurred more <br />people to move to the state. Conversely, there is <br />some chance the cost could be lower if building <br />some portion of the 1.7 million eased competition <br />at the bottom end of the housing market and <br />allowed some low-income families to find <br />4 Legislative Analyst’s Office www.lao.ca.gov <br />AN LAO BRIEF8.A - Page 12