Testimony to the Little Hoover Commission

On April 23, 2025, Terner Center Managing Director Ben Metcalf and Research Director Sarah Karlinsky testified at the Little Hoover Commission hearings on Governor Newsom’s proposed state government reorganization, which would create a California Housing and Homelessness Agency.

Ben Metcalf, Terner Center for Housing Innovation, University of California, Berkeley

Good morning, Commissioners. My name is Ben Metcalf, and I am the Managing Director of the Terner Center for Housing Innovation at the University of California, Berkeley. I am also the former Director of the Department of Housing and Community Development (2015–2019) and the former Deputy Assistant Secretary for Multifamily Housing at HUD (2012–2015). 

I am pleased to be here today to discuss the proposal before you to create a new Housing and Homelessness Agency for the State of California. I believe that this proposal takes important steps in the right direction to rationalize our fragmented and unwieldy affordable housing finance system and set us on a better path to deliver affordable housing more effectively to the Californians who desperately need it. 

In my remarks I will first describe the most significant problems associated with our current system. I will next explain why I think the steps proposed in this reorganization can help address these problems. Lastly, I will share some thoughts about how to ensure the successful implementation of the proposed reorganization plan. 

The Problem

There are two key challenges with our current housing delivery system. The first is that housing, which is perhaps the state’s most bedeviling policy issue, is just one of many unrelated policy areas currently included in the state’s Business, Consumer Services and Housing Agency (BCSH). Prior to the last state reorganization under Governor Jerry Brown in 2012, housing was included in a Business, Transportation, and Housing Agency (BTH). The 2012 reorganization created a standalone transportation agency, while leaving housing with a cluster of business and consumer-related services. Not only was housing not prioritized within this reorganization, housing wasn’t even originally included in the name of the proposed agency, which was first titled the “Business and Consumer Services Agency.” The agency we now know as BCSH currently oversees a kitchen sink of other unrelated state functions—including alcoholic beverage control, horse racing, and cannabis regulation—all of which would compete for any Secretary’s attention and can sometimes result in the appointment of individuals to this role who lack a background or expertise in housing. 

The second challenge is one of affordable housing funding fragmentation. I’ve seen firsthand how fragmentation has undermined our ability to efficiently deliver affordable housing in California. As the head of California’s Department of Housing and Community Development (HCD) serving under Governors Jerry Brown and Gavin Newsom, I oversaw one of the largest expansions in housing and homelessness funding in state history. However, because our current housing delivery system is spread across multiple departments and constitutional officers, our system is far less efficient than it should be. 

A Terner Center brief released this week, “Reducing the Complexity in California’s Affordable Housing Finance System,” quantifies the cost of requiring affordable housing developers to stitch together many different sources of funding to make projects pencil. In analyzing data for new construction projects awarded Low-Income Housing Tax Credit (LIHTC) subsidies in California between 2020 and 2023, we have found that the inclusion of one additional public funding source is associated with an additional four months of predevelopment and $20,460 in per-unit total development costs, even after controlling for a variety of project characteristics such as project type or population served. Projects with three to five additional public funding sources take nearly two years, on average, between the first funding application and their LIHTC award. Especially in today’s inflationary environment, added time translates into added costs. 

As the report, Structured for Success, authored by Sarah Karlinsky, then with the California nonprofit SPUR and now the Research Director at the Terner Center, painfully details, California’s governance structure for housing is uniquely fragmented. The Terner Center is currently in the process of conducting an analysis of how California’s housing delivery system compares to other states. While this analysis has not yet been completed, our initial findings show that California has one of the most fragmented affordable housing financing systems in the entire country. In fact, no other state has a system like ours, and in most states, housing functions are consolidated into a single entity. 

The Reorganization Plan

This proposed reorganization would take a couple important steps. First, it creates a standalone agency focused solely on housing and homelessness. Doing so increases the likelihood that any future Secretary will bring a background of work in the housing and homelessness area and that they will be able to devote the necessary time and attention to creating a more integrated and effective administrative framework for addressing the state’s housing and homelessness challenges. A sole focus on housing would better enable the agency to oversee existing housing entities and lead the state’s efforts to align housing initiatives with areas such as transportation, climate, and community planning.

Second, it creates a new Housing Development and Finance Committee within the Housing and Homelessness Agency. This Committee would be responsible for overseeing and streamlining affordable housing funding programs currently under the Governor’s purview. This is a significant first step toward creating the true “one-stop shop” envisioned by the legislature when they passed AB 434 in 2023. It also directly responds to the growing portfolio currently under the Director of HCD and the Executive Director of the California Housing Finance Agency (CalHFA), allowing both individuals to focus on large portfolios of other critically important work. Notably HCD’s housing policy footprint has grown by an order of magnitude as it has taken on implementation of significant market-moving land use, zoning, and building code oversight roles. The creation of a separate committee devoted to financing affordable housing increases the likelihood that the individual heading the new committee will come from a housing and homelessness development or finance background. 

Under this new structure, the governance committee will have the ability to align multiple funding programs that currently provide subsidies for multifamily affordable projects—in terms of scoring systems, timely funding awards, and moving projects forward. Importantly, the reorganization also includes an appeals process for program allocation and scoring adjustments. These processes will help ensure greater transparency around funding allocations. The reorganization plan also charges the committee with streamlining compliance monitoring. Currently, affordable housing owners waste countless hours ensuring projects are compliant with the requirements of multiple similar, but distinct funding sources. This new committee structure mirrors the effective governance structure used across various state functions and programs and notably aligns with the administration of Low-Income Housing Tax Credits, a housing program currently under the Treasurer’s Office.

Implementation Considerations

There are several steps needed to ensure successful implementation of the reorganization. 

1. Integrating other key affordable rental housing funding sources

Two of the key sources of affordable housing funding—tax credits and tax-exempt bond debt—are housed under the Treasurer. Indeed, our brief “Reducing the Complexity in California’s Affordable Housing Finance System” finds that the added delays and costs due to multiple sources of state funding are exacerbated by duplication occurring between the two Treasurer-administered programs and those administered by the Governor.

In a more streamlined funding system, all the State’s affordable rental housing funding sources would enjoy a shared governance structure. The proposed composition of the Housing Development and Finance Committee facilitates a subsequent merger as it mirrors aspects of LIHTC and tax-exempt bond debt governance, both of which are managed by Executive Committees (the California Tax Credit Allocation Committee and the California Debt Limit Allocation Committee, respectively). Ideally, as a next step, tax credits and bonds also move under the Housing Development and Finance Committee, and the Treasurer and Controller are added as Committee members, enabling the creation of a true one-stop shop for affordable rental housing finance. A solution is required to address the not uncommon scenario where a developer receives a Governor-administered housing subsidy but then is unable to receive (or must reapply or over many rounds) tax-exempt bonds and/or Low-Income Housing Tax Credits.

2. Training Housing Development and Finance Committee staff 

Moving existing staff from HCD and CalHFA into a new committee provides an opportunity to create an efficient organization that effectively executes its mission while embracing customer service and continuous improvement. However, while shifting the org chart may be a necessary prerequisite to that end goal, it is not alone sufficient. Effective reorganizations require culture change, training, and new systems.

For example, while I was at HUD in the mid-2010s, I led a comprehensive reorganization for our team of approximately 1,500 multifamily housing development and finance professionals. We reclassified and reassigned every staff position, took each employee offline for two to three weeks of intensive training, implemented risk-based processing and asset management protocols, and set higher standards for accountability across the board. We automated manual processes, implemented new workload tracking systems, and created an expectation that staff would serve as project managers and problem solvers to “get it done” with the assistance of subject matter experts and team support. This effort required an ongoing commitment of time and effort from leadership at all levels spanning multiple years; it required stakeholders to work with and support staff during the transitional time, and necessitated a budgetary commitment totaling millions of dollars in consulting support and systems investments. But it has resulted in measurable improvements to quality, timeliness, and staff engagement. A similar level of effort will be needed as a next step for this reorganization to achieve the articulated goals.

Thank you for your consideration of my comments. I am pleased to answer any questions that you may have.