According to the California Association of Realtors (CAR), the median home price in California is projected to reach $860,000 this year while the affordability index, which measures the percentage of the population that can afford a home at that price, stays stagnant at 17%.  Defining affordability necessitates a careful balance between housing costs and household incomes, with the U.S. Department of Housing and Urban Development setting a benchmark of 30% or less of gross income for total housing expenses, including utilities. Yet, a significant portion of Californians are burdened with housing costs exceeding this threshold, with some even surpassing 50%.

Amidst this housing crisis, California faces another imperative: meeting ambitious environmental goals outlined in Senate Bill 100, mandating 100% carbon-free electricity by 2045. Balancing affordable housing initiatives with environmental sustainability requires a strategic approach.

Affordable Housing Challenges

Securing funding poses a significant hurdle for affordable housing endeavors, whether it’s for the projects themselves or the initial investment required to enhance their energy efficiency. Despite the escalating demand for affordable housing in California, funding remains insufficient, covering only 12% of the necessary budget to meet the state’s housing goals. California faces a substantial shortfall in meeting housing demands, with projections indicating a need for 180,000 additional homes annually, yet construction has averaged fewer than 80,000 homes per year over the past decade. While incentive programs exist to encourage the adoption of energy-efficient measures, particularly in affordable housing projects, their capacity to provide adequate incentives is limited.

Incentive Programs

To support the adoption of energy-efficient measures in housing, there are statewide incentive programs available.

• The Building Initiative for Low-Emissions Development (BUILD) Program provides incentives for advanced building design and supports all-electric technologies.
• The Clean Energy Homes Program assists affordable housing developers in designing energy-efficient multifamily housing.
• The California Energy-Smart Homes Program offers incentives for transitioning to all-electric construction.

• The California Energy Design Assistance (CEDA) Program supports commercial new construction and major renovation projects.
• Provides a 40% incentive kicker for grid-constrained and subsidized affordable housing projects to assist with affordable housing goals

CEDA and California Energy-Smart Homes programs layer incentives with the BUILD program.

Incentive Program Limitations

The guidance on decarbonization provided by incentive programs is invaluable. However, it’s crucial to acknowledge that these incentives alone are insufficient to fully offset the costs of decarbonization and affordable housing. Hence, advocating for policy changes to facilitate project completion is imperative. Collaboration among federal, local, and state governments, as well as across housing, health, and social services sectors, is essential.

SB 423 and SB 4, both enacted in 2024, aim to address these challenges by opening up new land for affordable housing and streamlining approval processes, thereby reducing time and costs associated with development.

Collaboration among government agencies, architects, and clean energy advocates is paramount to advancing affordable housing while ensuring energy efficiency. Addressing California’s housing crisis is undoubtedly challenging, but the synergy between various sectors holds the promise of steering us toward meaningful progress in the right direction.