Enterprise Community Partners: $4.1B in State Funding Needed to Unlock 39,880 Shovel-Ready Affordable Units in California

Nearly 40,000 affordable housing units across California are fully designed, legally approved and partially financed — yet remain stalled for lack of a final layer of state funding, according to a new report published March 9 by Enterprise Community Partners, a national nonprofit that funds, consults and advocates for affordable housing.

The report, which analyzed applicant data from seven state subsidy programs over the past three years, identifies 461 "shovel-ready developments" comprising an estimated 39,880 units. Clearing the backlog, according to Enterprise Community Partners, would require approximately $4.1 billion in additional state-administered grants, low-cost loans and tax write-offs.

A Pipeline Stuck in Financial Purgatory

The findings underscore a persistent tension in California housing policy: state regulators have ordered local governments to plan for 2.5 million additional units by the end of the decade — with one million targeted for households earning less than 80% of regional median income — yet the public financing infrastructure to support that production remains undersupplied.

"Many have been sitting for a year or two waiting for funding," said Justine Marcus, policy director for Enterprise Community Partners' Northern California office and a co-author of the report. "There's no exit route right now. It's a bottleneck."

Two-thirds of the projects identified in the report have already received support from at least one other state program, according to Enterprise Community Partners, indicating that the stalled developments represent a relatively advanced and vetted segment of the affordable housing pipeline. Once the final state subsidy layer is awarded, funds must be deployed within a compressed timeframe — a requirement that effectively limits the list to projects with financing structures largely in place.

Morris Village: A Case Study

The report highlights a planned 44-unit development on East Morris Avenue in Modesto as illustrative of the broader challenge. The Morris Village project — half of whose units would be reserved for people experiencing homelessness — has received zoning approval, completed public review, earned local elected support and secured a site donated by a foundation. It has assembled a financial patchwork of local government and corporate grants, private debt and donated land, yet remains short of the total needed to begin construction after six years and 13 funding applications.

Betsy McGovern-Garcia, vice president of Self-Help Enterprises, one of two nonprofits behind the project, said the developments in the pipeline represent a high bar of project quality. "These are all projects that are close to amenities. These are all projects providing resident services. These are all projects that are financially feasible... They are all meeting the bar for what we want to see as a state out of our affordable housing community," she said.

McGovern-Garcia said her organization applied in February for a final round of state financing to close the funding gap and begin construction. "We are optimistic this might be our round," she said.

A Shifting Bottleneck

The current stall point represents the latest in a series of evolving constraints in California's affordable housing pipeline, according to the report and industry participants.

A decade ago, local regulatory approval was the primary obstacle, according to Nevada Merriman, policy advocate for MidPen Housing, an affordable developer in San Mateo County, who was leading a team of affordable developers in Silicon Valley at the time. California subsequently enacted legislation streamlining approvals for affordable projects, which shifted competitive pressure to the federal Low-Income Housing Tax Credit program. More recently, federal tax legislation enacted in 2025 expanded the tax credit program — increasing the supply of one credit type and allowing another to be distributed across a greater number of projects — easing that constraint.

The result, according to the report, is that projects can now more readily clear local approval and access the most significant layer of federal financing. However, developers typically cannot apply for federal tax credits until all other financing gaps are filled, making state-level funding the current critical path item.

"We're looking for state sources to fill that gap," said Merriman. "We want to make sure we don't leave those federal sources on the table."

Merriman said MidPen Housing currently has 1,198 units across seven developments waiting for that final funding tranche. "Should there be a source... there's a pipeline that is ready to go," she said.

State Budget Outlook

California's most recent major infusion of public affordable housing capital came through a voter-approved bond in 2018, which has since been fully allocated. The state's Housing and Community Development department estimates at least $1.8 billion in previously approved but unspent funds and other state and federal sources will be available to affordable developers in the current year. Gov. Gavin Newsom's proposed budget for the coming fiscal year does not include new discretionary affordable housing spending beyond that amount.

Advocates note that Newsom has taken similarly conservative postures in early budget negotiations in prior years, only to see the Legislature restore hundreds of millions of dollars in affordable housing subsidies in final budget agreements. California lawmakers are also considering a $10 billion affordable housing bond for the 2026 ballot. "If a majority of voters go for that, 'we'd be off to the races,'" Merriman said.

Construction Costs and the Price of Delay

The report also addresses the cost dimension of the financing bottleneck. Affordable housing construction in California is estimated to cost two to four times the amount of comparable projects in states such as Colorado and Texas, according to a 2025 study cited in the source article. Contributing factors include higher land and labor costs, restrictive zoning, slow permitting and impact fees.

Delays themselves compound costs. Each additional funding source added to a project's capital stack delays construction start by an average of four months and adds approximately $20,460 per unit, according to an analysis by the Terner Center for Housing Innovation at UC Berkeley cited in the source article.

The Newsom administration is pursuing structural reforms to address these inefficiencies. The governor proposed the creation of a cabinet-level California Housing and Homelessness Agency to consolidate the state's disparate housing loan and grant programs. Proposed legislative language would also require the new agency and the Treasurer's Office to operate in coordination, giving affordable housing developers a single application point for multiple state funding programs.

The Enterprise Community Partners report was published March 9, 2026, and draws on publicly available applicant data from seven state subsidy programs administered by various California state agencies over the prior three years.