Newsom Plans Cuts to California’s $500 Million Anti-Foreclosure Fund for Tenants

By Elias DaSilva | September 11, 2024.

A program aimed at preserving existing affordable housing is under scrutiny before the state has spent any of the nearly $500 million allocated for it.

In 2021, California established the Foreclosure Intervention Housing Preservation Program (FIHPP), a $485 million initiative funded through 2027, as the economic fallout from the COVID-19 pandemic put many low-income households at greater risk of foreclosure. The program sought to keep affordable homes and buildings with fewer than 25 units out of reach of corporations by giving nonprofits, community land trusts, and tenants of foreclosed properties the opportunity to purchase them.

With a looming state budget deficit, Governor Gavin Newsom froze the program in January 2024 before any of the funds were spent. Now, he proposes to cut the program in half, even as foreclosure rates have risen and evictions have surpassed pre-pandemic levels in California. Nationally, eviction filings are associated with increases in the number of people experiencing homelessness, according to a 2023 study.

“When rents become unaffordable and tenants are displaced, those people are at the greatest risk of becoming homeless,” said Leo Goldberg, co-director of policy and capacity building at the California Community Land Trust Network.

The organization supports 26 nonprofits statewide that help residents collectively own their properties through land trusts to preserve affordability.

“This intervention comes before people are completely out of the community before living on the streets, where interventions are extremely costly,” Goldberg said.

The program allows nonprofits or community groups to purchase affordable buildings at their lowest price, providing residents with shared ownership and responsibility. And, Goldberg said, there are many properties that meet the criteria. In 2023 alone, California had more than 32,000 foreclosures, according to an analysis of ATTOM data by the Orange County Register.

Land trust advocates and other nonprofit community organizations said they need state funding to compete in the market with for-profit real estate investors, who in some cases have exploited state law that allows tenants of foreclosed properties, the government, or nonprofits an exclusive 45-day window to match the winning bid at a foreclosure auction.

San Francisco artist Matthew Souzis and his neighbors in the apartment building believe an injection of these foreclosure intervention funds could help transform their living situation.

Souzis said he has seen rents skyrocket in the area surrounding his apartment in the Mission since he first moved there in 2007. The building has also accumulated a number of habitability issues that have yet to be addressed, he said. The building has frequent plumbing problems, and Souzis said a sign notifying residents of the need to retrofit the building against earthquakes recently fell down after being posted for nearly eight years.

“It’s a real liability for the owners. Most of the tenants are low-income. It’s a rent-controlled building and it has a lot of infrastructure issues,” Souzis said. “If the goal is to make money, they’ll do whatever they can to force people out so they can bring in market-rate people.”

Prado Group acquired the property in November 2023 and told KQED that they have been working to complete outstanding repair work since then. Bill Goldman, their senior vice president, said the company has completed more than 50 deferred maintenance issues, including seismic retrofitting, painting the building, and removing dry rot.

“We anticipate the remaining work will be completed in compliance with city ordinances and all violations cleared by the end of this month,” Goldman told KQED. “We take our responsibility as owners very seriously and are committed to transparency and responsiveness as we repair and improve the property, including all deficiencies that were not addressed by the previous owner.”

The urgent need for repairs makes the rent-controlled building at 324 14th St. a strong candidate for foreclosure intervention funding. The San Francisco Community Land Trust is interested in purchasing the property, giving residents collective ownership, and using the funding to complete the necessary repairs.

“The best case for this building would be if the land trust bought it,” said Souzis. “There’s no way I could live in San Francisco if I lose this place. And most people in the building are in the same situation.” But now, that option is uncertain.

Without additional financial support, land trust representatives told KQED that funding the purchase would be nearly impossible. “Opportunities to prevent displacement and stop more people from becoming homeless will evaporate without funding. That’s a widespread concern,” said Kyle Smeallie, policy director for the San Francisco Community Land Trust. “We believe in a model that elevates community ownership but, above all, prevents displacement of our residents. And that’s why the funding is so critical.”

By the time state agencies completed the guidelines to implement the foreclosure intervention program in 2023, the state was facing a major budget deficit. Areas across government are facing cuts, including affordable housing.

The governor will release an updated state budget proposal, called the May Revision, on May 10, and supporters are now rallying to maintain current funding and see that the money actually begins to be used.

“The size of the deficit in January has required cuts in almost every aspect of city government, and some housing programs are part of that,” said H.D. Palmer, a spokesman for the State Department of Finance. Cutting funding for the foreclosure program, he said, was part of “reducing proposed spending over a period of several years.”

San Francisco Supervisor Dean Preston hopes the legislature can find a way to preserve the program in this year’s budget, and on Tuesday, he introduced a city resolution urging the governor to avoid any cuts.

“Land acquisition through this type of program is really essential to meet affordable housing goals and create stability for people who are vulnerable to displacement,” he said. “There’s a lot of land in my district and across San Francisco that could be acquired with this funding.”

Affordable housing nonprofits have submitted applications to preserve more than 300 homes in San Francisco, totaling $124 million, according to the resolution.

Across California, nearly 30% of affordable housing providers surveyed, such as land trusts, Habitat for Humanity chapters, tribes, and other organizations, have already identified projects that could use foreclosure intervention funds, according to research from the California Community Land Trust Network.

Those organizations shared plans for a total of 162 properties, ranging from 1 to 25 units each, that could be acquired if funding were available. “There has never been a greater need for these funds. We face the dual crisis of homelessness and the displacement of low-income, predominantly Black and Brown households,” reads a letter of support for the program signed by dozens of affordable housing providers, advocates, and other experts. “We urgently call on the Legislature and the Governor to provide the Foreclosure Intervention Housing Preservation Program with the resources promised for three years and to avoid further delays in implementing this innovative program.”

As lawmakers negotiate the state budget, affordable housing advocates are pushing the model on smaller scales and are seeing success.

In Los Angeles County, a $14 million pilot program has funded efforts to purchase and rehabilitate eight properties housing about 110 people throughout the county. “I see this as a success story and a learning opportunity,” said Kasey Ventura, organizer of the Beverly Vermont Community Land Trust in Los Angeles. “Now there are residents who no longer have to fear evictions, and all these buildings are being brought up to code to have safer standards.”

In San Francisco, Souzis hopes his building is next. “We have the feeling that we’re going to be given the ax,” Souzis said of why he hopes the building soon moves to the land trust. “We all agree, in our tenant association, that this would be much, much better.”