California Air Resources Board

Principal Investigator/Author: Shishir Mathur

Contractor: San Jose State University

Sub-contractors: Cal Poly San Luis Obispo

Contract Number: 21SCT011

Project Status: Completed December 2024

Relevant CARB Programs: Sustainable Communities & Climate Protection Program

Topic Areas: Sustainable Communities, Vehicle Miles Traveled (VMT) Reduction & Climate Goals, Land Use & Transportation Research, Climate Change

Research Abstract:

This white paper examines the relative potential of three housing finance programs: an employer-assisted housing (EAH) partnership program in the form of a construction grant, a loan loss guarantee program (LGP), and a pre-development revolving loan fund (PDRLF) to support the construction of infill housing in California, particularly focusing on transit-oriented developments (TODs), to advance State of California (hereafter referred to as State) policy goals including reducing vehicle miles traveled (VMT) and providing affordable housing. It includes a literature review, case studies, and interviews with developers, policy experts, and program administrators to highlight key features, models, opportunities, and challenges of these programs, and assess the feasibility of the programs’ end-user adoption in California.

The paper also estimates the relative housing production potential and VMT reduction from a hypothetical $100 million State investment in each program, including by leveraging additional private funds. An order of magnitude analysis, where a factor of 10 equals one order of magnitude, is used to ascertain each program’s relative housing production and VMT reduction potential. The paper uses existing VMT reduction models to estimate VMT reduction resulting from each program relative to a baseline of a regional comparator—a single-family house affordable to a household earning median income for that region.

Findings indicate that all three housing finance programs—PDRLF, LGP, and EAH—support a similar number of housing units and VMT reduction, that is, the housing units and VMT reduction vary by less than a factor of 10 across the three programs. The EAH program, while valuable, is harder to implement. EAH projects are often not eligible for federal housing assistance because they violate fair housing requirements. So, any support for EAH should be robust enough to obviate the need for such federal assistance. Additionally, the State may have to expand the existing carve-outs (such as those for farmworkers and school employees’ housing) to allow local and State funding for EAH—a politically challenging task.

From an equity perspective, both PDRLF and LGPs can be very beneficial for small developers who are often led by BIPOC and minority community members. Many such developers are mission-driven organizations, such as churches, that know the local community’s housing needs well and can provide housing for hard-to-reach populations. On the other hand, EAH programs can be critical to build workforce housing. The programs need to serve low-income, minority, and underserved communities proactively. For that, they need to be flexible. For example, they could allow rolling applications and not impose onerous requirements on the applicants and assistance recipients. Furthermore, they could assume a secondary lien position, choose local and regional organizations—such as housing trusts and Community Development Financial Institutions (CDFIs) to implement the program—and take into account local and regional variations, including real estate market conditions. Finally, they could reach diverse pools of real estate developers and lenders, and provide technical assistance to the developer-applicant.

The State can play a crucial role by funding and recapitalizing the loan and guarantee pools, offering technical assistance, and providing incentives for leveraging these programs.

The paper concludes that further research is needed for PDRLFs, LGPs, and EAHPs due to their comparable housing and VMT outcomes, from an order of magnitude perspective. That is, the VMT reductions achieved and housing units supported do not vary by more than a factor of 10. The paper emphasizes the importance of serving low-income, minority, and underserved communities. Future work should refine methodologies, collect primary data, and run regional VMT models to obtain detailed estimates of housing assistance and VMT reduction, considering post-COVID changes in household type, location preferences, and travel behaviors.

Keywords: infill housing, affordable housing, transportation and land use, sustainable communities, vehicle miles traveled (VMT), loan-loss guarantee program, pre-development revolving loan fund, employer-assisted housing program