Changes to student housing program threaten ‘viability’ of affordable housing projects

Michael Burke, EdSource

Community college leaders across California are asking lawmakers to reconsider changes made in this year’s state budget to how student housing projects are funded, saying the amendments jeopardize their ability to build new affordable housing.

As part of the 2023-24 budget agreement, the state is requiring community colleges to use local revenue bonds to pay for construction costs for new affordable housing projects under a student housing grant program originally unveiled in 2021. The state is also requiring the University of California and California State University to issue their own bonds to pay for projects on their campuses.

Previously, the state planned to award grants from the state’s general fund to the colleges, but Gov. Gavin Newsom and state lawmakers shifted to asking them to borrow money in an attempt to save costs amid declining state revenues.

But that new structure is untenable for community colleges because they will have trouble generating enough revenue to secure the bonds, wrote a coalition of about 20 local community college presidents and chancellors in a letter to top state lawmakers. Sonya Christian, the statewide chancellor for the community college system, also joined in signing the letter.

“The revised program structure jeopardizes the viability of affordable student housing projects across the state and our opportunity to address growing housing insecurity among community college students,” they wrote.

The chairs of the Assembly and Senate budget committees — Assemblymember Phil Ting and Sen. Nancy Skinner — did not immediately return requests for comment Friday.

The community college leaders noted in their letter that revenue bonds must be supported “with revenue generated.” But because the housing projects will feature affordable, below-market rental rates, the revenue the colleges generate from rent is “not sufficient to fund both construction costs and operating expenses,” they added. And unlike CSU and UC campuses, community colleges don’t have tuition revenue or other sources of revenue “to serve as collateral” for the loans.

Therefore, they are “deeply concerned these projects will not pencil out for districts,” thus preventing community college students across the state from accessing affordable housing. That could be especially problematic because many of the state’s community college students are without stable housing.

In their letter, the community college leaders propose two possible amendments for lawmakers to consider. One suggestion is for the state to use dollars from its general fund to subsidize affordable student housing rental rates.

They also propose that, rather than using local bonds, the community colleges use state-issued bonds to pay for construction costs. Under the proposal, community college districts would enter into agreements with the State Treasurer’s Office or the Public Works Board to secure those bonds. The letter notes that community colleges have previously used that mechanism for some capital projects.

“This approach would provide a streamlined mechanism for the state to pay all debt service and below-market rent revenues would cover operating costs, preserving the program’s goal of affordability,” the community college leaders wrote.