Newsom Eyes Cuts to California’s $500M Anti-Foreclosure Fund for Renters

Updated 2 p.m. Friday

A program aimed at preserving existing affordable housing is on the chopping block — before the state has spent any of the nearly $500 million set aside for it.

In 2021, California created the Foreclosure Intervention Housing Preservation Program (FIHPP), a $485 million program funded through 2027, as 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 under 25 units out of the hands of corporations by allowing nonprofits and community land trusts, as well as tenants of the foreclosed home, the opportunity to purchase them.

With a state budget deficit looming, Gov. Gavin Newsom froze the program in January 2024 before any dollars in the program were spent. Now, he’s proposing to cut the program in half — even as foreclosure rates have climbed and evictions have surpassed their pre-pandemic levels in California. Nationwide, 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 pushed out, those folks are at the highest risk of homelessness,” said Leo Goldberg, co-director for policy and capacity building at the California Community Land Trust Network.

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

“This intervention comes in before people are completely priced out of the community before they live 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, giving residents split ownership and responsibility. And, Goldberg said, there are plenty of properties that fit the bill. California had more than 32,000 foreclosure filings in 2023 alone, according to an Orange County Register analysis of ATTOM data.

Advocates with land trusts and other nonprofit community organizations said they need state funding to compete on the market with for-profit house-flippers, who in some cases have abused the state law that allows tenants of foreclosed homes, the government or nonprofits an exclusive 45-day window to match the winning bid in a foreclosure auction.

San Francisco artist Matthew Souzis and his apartment building neighbors believe an injection of this foreclosure-intervention funding could help transform their living situation.

Souzis said he’s seen rents skyrocket in the area surrounding his apartment in the Mission since he first moved there in 2007. The building has also amassed a number of habitability issues that have yet to be addressed, he said. The building has frequent plumbing challenges, and Souzis said a sign notifying residents about the need to upgrade the building seismically only recently came down after being up for almost eight years.

“It’s a real liability for the owners. Most of the tenants are low-income. It’s a rent-controlled building and has a lot of infrastructure problems,” Souzis said. “If the objective is to make money, they’re going to do everything in their power to force people out so they can bring in people at market rate.”

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

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

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 necessary repairs.

“The best case for this building would be if the land trust bought it,” Souzis said. “There’s no way I could possibly live in San Francisco if I lose this place. And most of the people in the building are in the same boat.”

But now, that option is uncertain.

Without additional funding support, representatives for the land trust told KQED that financing the purchase would be near impossible.

“Opportunities to prevent displacement and stop further homelessness will evaporate without the funding. That’s a concern across the board,” said Kyle Smeallie, policy director for the San Francisco Community Land Trust. “We believe in a model that lifts up community ownership but, first and foremost, prevents displacement of our residents. And that’s why the funding is so critical.”

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

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

“The size of the shortfall in January has necessitated reductions across nearly every aspect of city government, and some housing programs are part of that,” said H.D. Palmer, a spokesperson for the State Department of Finance. Cutting funding for the foreclosure program, he said, was part of “reducing proposed spending over a multi-year period.”

San Francisco Supervisor Dean Preston is hoping 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.

“Acquiring sites through this kind of program is really essential to meeting affordable housing goals and to create stability for folks who are vulnerable to displacement,” he said.  “There are plenty of sites 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 surveyed affordable housing providers — such as land trusts, Habitat for Humanity chapters, tribes and other organizations — have already identified projects that could use foreclosure-intervention funding, according to research by the California Community Land Trust Network. Those organizations shared plans for a total of 162 properties, ranging from 1-25 units each, that could be acquired should the funding become available.

“There has never been a greater need for these funds. We are facing the double crisis of homelessness and displacement of low-income, predominantly Black and brown households,” reads a letter in support of 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 the resources that have been promised for three years and to avoid any further delays in implementing this innovative program.”

As lawmakers negotiate the state budget, affordable housing advocates are pushing ahead with the model at smaller scales — and seeing success.

East Bay grandmother Jocelyn Foreman’s house was a catalyst for the funding in 2021 after she partnered with a land trust to fundraise and buy the home she was renting, staving off her eviction and displacement.

In Los Angeles County, a $14 million pilot program has funded efforts to purchase and rehabilitate eight properties housing around 110 people across the county.

“I see this as a success story and a learning opportunity,” said Kasey Ventura, an organizer at the Beverly Vermont Community Land Trust in Los Angeles. “There are residents now who no longer have to fear evictions, and all of these buildings are being brought up to code so they have safer standards.”

Back in San Francisco, Souzis is hoping his building could be next.

“There’s a sense that an ax is going to come down on us,” Souzis said about why he hopes the building will soon turn over to the land trust. “We all agree, in our tenants association, that this would just be much, much better.”