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California Seeks To Tackle Homelessness With Nation's First Dedicated Annual Fund

City leaders are among those backing new efforts to address California's homelessness problem, the worst in the nation. (Getty Images)

By Lou Hirsh CoStar News January 13, 2021 | 4:25 P.M.

California lawmakers are proposing a measure, described as the first of its kind in the country, that would create permanent annual funding for housing development and other measures meant to combat homelessness. The bill, dubbed by supporters as “Bring California Home,” is meant to generate $2.4 billion by increasing taxes on major companies to help the state address the challenges that have created the largest population of unhoused people in the nation. “Our state is facing an unprecedented homelessness crisis that is on the verge of becoming a full-blown catastrophe due to the economic impacts of COVID-19,” said state Assemblymember Luz Rivas, a Democrat from Arleta and author of the newly introduced Assembly Bill 71, during an online news conference Wednesday. Lawmakers for years have struggled to address the state's growing homeless population, which increased by 16.4% in 2019 over the previous year, accounting for more than the entire nation’s increase in homelessness in the same time, according to the most recent data from the U.S. Department of Housing and Urban Development. It found that nearly one-quarter of all the nation’s homeless people are in California, and the effects of the pandemic are expected to accelerate the crisis. The legislation seeks to close certain state corporate tax loopholes and restore tax rates to 1980 levels in order to collect new permanent state funding for housing and related services primarily from multinational companies that generate an annual profit of more than $5 million. Rivas said AB 71 would generate enough permanent new funding for the state and local communities to help nearly 150,000 Californians each year avoid or escape homelessness through new affordable housing development, job placement assistance and other financial and health support services. Supporters, which include statewide housing advocacy groups and the mayors of large cities including Los Angeles and Oakland, say the state's effort has not been attempted before at this scale as a permanent funding source. Business advocates have already raised concerns about high taxes and other regulations that they say have contributed to a series of corporations relocating from California to other states. Supporters of the new legislation said the homelessness issue is among the factors driving businesses from the state’s urban centers. "Further clouding California’s already stormy business climate by imposing more taxes on thousands of businesses big and small is the last thing we should be doing in the middle of an economic crisis,” said Jim Wunderman, president and CEO of the pro-business group Bay Area Council, in a statement to CoStar News, adding that "ending homelessness is one of our top priorities" and urged that the state address structural problems such as housing development. But supporters say the measure is meant to address a criticism business owners have provided for years. “This is thoughtfully done so we can see businesses thrive,” said Los Angeles Mayor Eric Garcetti during the news conference. “But if you talk to a businessperson, I’ll tell you what’s worse to them than anything they have to pay in taxes or regulation; it is people encamped in front of their businesses, the idea that their workers have to go past places where people are experiencing mental health crises and drug addiction.” Boosting Housing StockThe measure was assigned this week to the Assembly’s Housing & Community Development Committee for a review that is yet to be scheduled. The core of its funding mechanism is an increase in the rate at which California taxes the net income of large corporations operating in the state. Currently, California taxes most large companies at a rate of 8.84% of their total net income, with the rate set at 10.84% for financial institutions. AB 71 would change that to 9.6% for most companies and 11.6% for financial institutions, but only for companies with more than $5 million in annual net income, regardless of whether they are headquartered in the state. Oakland Mayor Libby Schaaf said the new legislation is needed to allow communities to stop “nibbling around the edges” with short-term homeless programs that struggle to obtain funding despite their effectiveness, by providing cities and counties with a permanent stream of funding. Schaaf called AB 71 "the first proposal that is comprehensive enough and at scale to actually permanently end homelessness." Assemblymember David Chiu, a San Francisco Democrat and co-sponsor of the bill, said the legislation has strict and extensive reporting and accountability measures, requiring cities and counties to justify spending and its effectiveness regarding homelessness. It also includes state matching incentives for cities and counties that increase their own investments in homelessness programs and related accountability efforts. Chiu said the legislation also supports programs addressing racial and other social equity issues that have served to increase the existing pervasiveness of homelessness in the Black community among other groups during the pandemic. AB 71 is also co-sponsored by Assemblymember Richard Bloom, a Santa Monica Democrat, and housing advocacy groups including Housing California and Corporation for Supportive Housing. Introduction of the state legislation came as new Los Angeles City Councilman Kevin de Leon, a former state senator, this week introduced several local motions aimed at boosting the city’s stock of housing units for homeless people by 25,000 by 2025. Los Angeles had the second-largest population of homeless people in the nation as of late 2019 at more than 66,000, behind only New York City, which had about 78,604, according to the most recent data available from the U.S. Department of Housing and Urban Development. Within California, homeless populations in San Diego and San Jose also rank among the five largest in the nation, according to federal data.

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