California’s affordable housing debate is dominated by calls to build more units, faster. Lawmakers announce new construction projects. Advocates push for streamlined approvals. Headlines celebrate ribbon-cuttings for new developments.
But behind the scenes, a quieter crisis is unfolding. The challenge is not just building new housing – it’s keeping existing affordable buildings financially stable so they can continue to house people over the long term. Right now, that’s proving more difficult than most realize.
Keeping Affordable Housing Open
Affordable housing is often discussed simply in terms of construction costs, but the financial reality is more complex. To keep an affordable building running, especially one serving people with low incomes or disabilities, three funding streams are required:
Construction funding to build the housing.
Operating funding to keep the housing running over time.
In some cases, supplemental funding for resident services.
This third category – operating subsidies – is often ignored. In California, the shortage of these funds has become a significant barrier to maintaining affordable housing.
“When you’re developing permanent supportive housing, you need money to build the building, service dollars, and your operating income,” says Brad West, policy specialist with the Supportive Housing Alliance in Los Angeles. “We’re having to get really creative figuring out where we get our operating subsidies from.”
Why Operating Subsidies Are Essential
This challenge is especially acute in permanent supportive housing, a category of affordable housing designed for people with extremely low incomes, including those who have experienced homelessness or live with disabilities. In these buildings, residents typically pay only what they can afford, which is often far below the cost required to operate the property.
To cover the gap between resident rent and actual operating expenses, providers rely on rental subsidies, most commonly federal Section 8 vouchers. These subsidies provide the predictable monthly income needed to pay for maintenance, utilities, insurance, and staff, allowing buildings to remain financially stable over time.
Los Angeles illustrates how this problem is playing out in practice, even though similar constraints exist in many housing markets. The city has reached its limit on the number of vouchers it can allocate to new supportive housing developments. As a result, providers must search for alternative operating funding, often piecing together limited state or local sources that may not be reliable over the long term.
Without stable operating subsidies, supportive housing projects may be delayed, scaled back, or operated under financial strain. Over time, persistent deficits can lead to deferred maintenance, reduced staffing, and growing risk to the building’s long-term viability.
When Funding Falls Short
Consider a building that opened 20 years ago with funding from a federal program that included rental subsidies. These subsidies were designed to increase each year modestly – often capped at 3 percent annually, even when expenses rose faster. Over the years, the gap between operating costs and rental income has widened.
Today, some of these buildings receive as little as $650 per month per unit in rental income. Meanwhile, insurance premiums have soared, utility costs have risen, and maintaining aging infrastructure gets more expensive. The financial model no longer works. “Some housing providers are pouring tens of millions of dollars every year into projects just to keep them afloat,” West says. “And that jeopardizes the financial position of the parent nonprofit.”
Eventually, cuts become unavoidable. Services are scaled back, maintenance is postponed, and in some cases, the nonprofit organization managing the building may collapse. Residents can be left without stable housing.
Why Keep Building?
If operating funding is this uncertain, it raises an obvious question: why do supportive housing projects continue to move forward at all? One reason is that construction funding is often easier to secure than the long-term operating support needed to sustain a building after it opens.
Policymakers and the public also tend to focus on new housing because it provides visible evidence of progress. Ribbon cuttings and new developments demonstrate that action is being taken, even if the long-term financial stability of those buildings remains uncertain.
By contrast, keeping a decades-old building operational draws little attention. There are no ceremonies or press releases for routine repairs or ongoing operations, just the ongoing work required to keep existing homes safe and functional. “No one wants to focus on how we invest in assets that have been around for 20, 25, 30-plus years,” West says. “But those buildings are community assets. We certainly don’t want to lose them.”
Without reliable operating funding, California risks expanding its supply of supportive housing while older buildings gradually become financially unsustainable.
Here is a revised version with more concrete, actionable guidance for each group:
What Residents, Investors, and Homebuyers Should Know
For renters in supportive housing, ask property managers whether the building receives ongoing rental subsidies such as Section 8 vouchers, and whether those subsidies are tied to long-term contracts. You can also ask how maintenance and repairs are handled and whether staffing levels have changed. Frequent delays in repairs, reduced on-site staff, or visible deferred maintenance can be signs that operating funding is under strain.
For small investors or nonprofit board members, review the building’s operating statements in detail. Compare rental income, including subsidies, against actual expenses such as insurance, utilities, and payroll. Look for recurring operating deficits, reliance on one-time grants to cover routine expenses, or rising insurance and maintenance costs that are not matched by increases in rental income. These patterns can signal long-term financial risk even if the building appears stable today.
For homebuyers evaluating neighborhoods that include supportive housing, pay attention to the physical condition and management of nearby properties. Buildings that are well maintained, fully staffed, and in good repair are more likely to have stable operating funding. You can also review public records or local housing authority reports to see whether properties have received ongoing funding support or recent reinvestment. Financially stable supportive housing helps preserve neighborhood stability, while buildings under financial strain may face maintenance issues that affect surrounding property values over time.
The Bottom Line
California’s affordable housing crisis is not just about constructing more units. It’s about ensuring the long-term survival of the affordable housing that already exists. That requires reliable, ongoing operating funding, not just one-time construction investment.
Supportive housing providers say the model itself is proven, but its success depends on stable operating support over time. “Permanent supportive housing is the cheapest, most effective way actually to solve chronic homelessness,” West says. “But we need to be given the resources to do our jobs.”
About the Expert: Brad West is a policy specialist with the Supportive Housing Alliance in Los Angeles, a coalition of nonprofit housing developers focused on permanent supportive housing. He previously worked on housing and homelessness policy in the California State Assembly and has spent his career advocating for affordable housing solutions across Southern California.
This article shares insights about affordable housing funding in California. It does not constitute legal, financial, or investment advice. All details are based on interviews and publicly available sources.
This article was sourced from a live expert interview.
Every month we conduct hundreds of interviews with active market practitioners - thousands to date.
As Phoenix’s housing market grows more competitive, locals are paying close attention to a handful of neighborhoods where new investment, infrastructure, and job growth are quietly taking ...
Gerard Hagan, co-owner and agent at The Best Edmonton Real Estate Team, argues that Edmonton’s housing market is shaped by forces that set it apart from most North American cities. Unlike ...
Madison, Wisconsin’s real estate market remains strong while many U.S. cities face cooling demand and rising inventory. Steady population growth and a diverse economic base have created pe...
The Pensacola real estate market is experiencing a notable shift from the seller’s market of recent years to a more challenging environment where inventory levels have reached new high...
A single communication breakdown can lead to significant occupancy drops and financial losses in multifamily properties, according to a senior industry executive who recently witnessed this ...
Estate Properties has launched as an independent brokerage, marking a transformative moment for the powerhouse firm that has generated an astounding $123 billion in sales volume across more ...
