Newsom’s latest housing fix: More Californians living downtown

A person in a loft looks out a big window.
A loft in downtown Los Angeles in 2016.
(Ricardo DeAratanha / Los Angeles Times)

Gov. Gavin Newsom wants to shift home construction in California away from rural, wildfire-prone areas and toward urban cores as part of his $286.4-billion budget plan that aims to align the state’s housing strategy with its climate goals.

The budget blueprint Newsom detailed this week includes $2 billion over two years in grants and tax credits to incentivize housing development closer to city centers in an effort to cut long car commutes and keep people near their “daily destinations.”

“This is a focus on moving away from the wildland-urban interface,” Newsom said Monday, referring to moving development away from rural areas outside the periphery of most California cities and where fires routinely burn. “Moving away from investments in housing that don’t focus on climate, health, integrating downtown, schools, jobs, parks and restaurants.”


The proposal would build on the $10.3 billion state officials allotted last year to bolster mixed- and low-income housing in California, but marks an evolution in the governor’s approach to solving the state’s multimillion-unit shortage. Though previous budgets have allocated significant money to affordable development, Newsom’s new plan would specifically steer funding toward housing projects in urban areas with existing resources, loosely defined as “downtowns” and “main streets.”

A person on a roof holds up a phone.
Resident Kevin Aquino photographs the skyline from the rooftop deck of a downtown L.A. apartment building on Oct. 28, 2021.
(Gary Coronado / Los Angeles Times)

The administration’s goal is to push local governments to plan for and permit millions of new units in areas already ripe for development and use to their advantage current laws that speed up the process. That way, state officials believe, cities can meet regional housing goals and avoid so-called urban sprawl, which could push people into areas at high risk for fire and put more polluting cars on the road during rush hour.

Jason Elliott, Newsom’s top housing advisor, said the governor’s budget interlaces housing, cost-of-living and climate policies to simultaneously address California’s top issues.

“The whole government, in terms of housing, wildfire, environment, is pointed toward building more downtown-oriented housing,” Elliott said. “It’s better for equity, it’s better for inclusion, it’s better for the environment.”

The $2 billion includes $500 million in grants for nonprofit and for-profit developers or local governments to construct more units on existing, but underused, urban land close to city amenities and transportation, and $300 million for sustainable projects in areas friendly to walking and biking and near public transit. Newsom also wants to direct hundreds of millions of dollars toward using excess state-owned land for affordable development and easing the cost burden of converting existing structures into residential spaces in downtown areas.


The plan would also provide $500 million in low-income housing tax credits for developers and $500 million to preserve and increase the state’s affordable and mixed-income housing stock and rehabilitate mobile home parks.

A light-rail train on a street.
A Gold Line train stops at a station on 1st Street in Los Angeles
(Myung J. Chun / Los Angeles Times)

Ray Pearl, executive director of the California Housing Consortium, said the investments help set expectations for affordable development and make it clear that Newsom wants to see more parking lots, dilapidated buildings and surplus land repurposed to house families.

“When the governor of your state says this is your priority, people listen,” Pearl said.

Daniel Sider, chief of staff for the San Francisco Planning Department, also applauded Newsom’s announcement.

San Francisco’s downtown, though its boundaries are not formally defined, stretches from the Financial District to SoMa and includes the Tenderloin, Nob Hill and Chinatown. These dense neighborhoods are home to an estimated 13.5% of the city’s nearly 875,000 residents, Sider said, citing 2019 numbers. He said the city has enough space to add tens of thousands of units in these areas and could use the funding to help make it happen.

“The idea is fantastic,” Sider said. “Broad brush, this is spot on. This is [like] San Francisco, this level of infill development.”

Newsom’s vision also complements city planning goals in Los Angeles, including for Central City and Central City North, which encompass 70,927 of the city’s 2019 population of more than 3.9 million. The city’s Downtown Community Plan could add up to 175,000 residents and 100,000 housing units by 2040 in an effort to revitalize Los Angeles’ “commercial, entertainment, cultural, and civic heart.”


Other L.A. neighborhoods are also expected to grow, though at a slower rate than what the planning agency has in mind for downtown. Some city rules wouldn’t allow for example, developing high-rise apartments with hundreds of new units. Newsom’s plan emphasizes accountability for local governments throughout California to plan for greater density, but that could also include duplexes and fourplexes.

Newsom’s proposal reflects the challenges ahead in solving California’s housing affordability crisis.

The median price tag for an existing single-family home in November was $782,480, according to state Department of Finance records, a dip below numbers that surged past the $800,000 mark earlier in 2021. California is also home to some of the most expensive rental markets in the country. A one-bedroom apartment costs an average of $2,200 in Los Angeles, according to the real estate site Zumper, and jumps to $2,850 in San Francisco.

Ninety percent of respondents in a March survey by the nonpartisan Public Policy Institute of California said housing affordability was a problem in their region, and 33% said they would seriously consider leaving the state because of the costs.

The ripple effect is evident throughout the state, as more low- and middle-income Californians flee their more expensive communities in search of cheaper costs of living, a trend that deepens inequities and exacerbates long commutes.

“I have many, many people in my community who work in my community and do four-hour trips home,” said Assemblywoman Buffy Wicks, an Oakland Democrat and chair of the Assembly Housing and Community Development Committee. “They are spending three or four hours on the road every single day because they can’t afford to live in the communities they work.”


But though Newsom’s proposed investments could “help get people out of cars,” said Mary Creasman, chief executive of California Environmental Voters, more incentives are needed to decarbonize the housing industry and ensure that any new units don’t worsen the climate crisis. Creasman said the Newsom administration should do more to develop green spaces such as parks, which increase quality of living and play a role in climate mitigation within cities.

“What we are building should be carbon-free, and how we are building should be with community-greening infrastructure,” Creasman said.

Assemblyman Vince Fong (R-Bakersfield) also urged caution, saying that he wants to know how rural counties will receive funding compared with urban counties. He noted that more is needed to address the core of the housing affordability crisis, including regulatory costs, labor requirements and the environmental review process for new projects.

“At the end of the day, as cost of housing continues to go up, the dollars that are being put into housing aren’t going far enough,” Fong said. “We have to address the fundamentals. We have to get back to the basics when it comes to housing.”