Thousands of affordable housing units across California are ready to begin construction but remain stalled due to funding gaps, according to a new study highlighting a major bottleneck in the state’s housing development pipeline.
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The research by Enterprise Community Partners estimates that roughly 39,880 affordable housing units across the state are fully planned and approved but unable to break ground because they lack the final funding needed to move forward.
These developments represent 461 “shovel-ready” projects — housing initiatives that have completed planning, zoning approvals and local support but remain stuck waiting for financing.
One example is the proposed Morris Village apartment complex in Modesto, where a 44-unit development designed to serve lower-income residents has been awaiting funding for years.
Half of the units at the project would be reserved for individuals experiencing homelessness. The site sits along a major bus route and has received zoning approval and support from local officials. Plans also include services such as job training, Zumba classes and on-site mental health care for residents.
Despite strong community backing, the project has struggled to secure the final funds needed to begin construction. Developers have assembled a mix of grants, private debt and donated land but still lack enough capital to start building. The development has now been waiting six years and has gone through 13 funding applications since it was first proposed.
The report describes a growing challenge for affordable housing developers across the state.
Many projects have already secured partial funding through various government programs but still require additional support to close financing gaps.
“Many have ‘been sitting for a year or two waiting for funding,’” said Justine Marcus, policy director for Enterprise’s Northern California office and one of the report’s authors. “There’s no exit route right now. It’s a bottleneck.”
According to the analysis, clearing the current backlog of affordable housing developments would require roughly $4.1 billion in additional subsidies through a mix of state grants, low-cost loans and tax incentives.
The study was based on three years of publicly available data from multiple state housing programs, which the nonprofit analyzed to identify projects that are nearly ready for construction but still awaiting financial support.
Marcus noted that most projects on the list are well-prepared developments that have already completed much of the planning process.
“They need to sort of have their (stuff) together,” she said.
Developers involved in these projects argue that many of them align closely with the state’s housing priorities.
“These are all projects that are close to amenities,” said Betsy McGovern-Garcia, vice president of Self-Help Enterprises, one of the nonprofit developers behind the Morris Village project. “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.”
McGovern-Garcia said the organization submitted another application for funding earlier this year in hopes of finally closing the project’s financing gap.
“We are optimistic this might be our round,” she said.
California policymakers have been pushing to expand housing development statewide in response to severe affordability challenges.
State housing regulators require local governments to plan for the construction of approximately 2.5 million additional housing units by the end of the decade. About one million of those homes are intended for households earning less than 80% of the regional median income.
However, the study suggests that funding limitations could slow progress toward that goal.
Affordable housing developments in California often rely on multiple layers of public funding, with some projects drawing support from two or three programs and others depending on as many as six separate sources. Each program has its own application process and timelines, which can delay construction.
Developers say those delays can become costly, as projects must continue paying for planning work, loan interest and staff while waiting for funding approvals. Inflation and rising construction costs can further increase expenses over time.
California is also known for having some of the highest affordable housing development costs in the country.
A 2025 study found that tax credit–financed housing developments in California can cost two to four times more than comparable projects in states such as Texas and Colorado.
Higher land prices, labor expenses, strict permitting requirements and regulatory fees are often cited as contributing factors.
Research from the Terner Center for Housing Innovation found that each additional funding source added to a project can increase costs by more than $20,000 per unit while delaying construction by an average of four months.
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State officials are exploring several approaches to address the backlog of affordable housing projects.
The California Department of Housing and Community Development estimates that at least $1.8 billion in funding could be available this year through previously approved programs and other state and federal sources.
Meanwhile, lawmakers are considering placing a $10 billion affordable housing bond on the 2026 ballot, which could significantly expand available funding if approved by voters.
In addition, the administration of Gavin Newsom is working to streamline California’s affordable housing financing system to reduce delays and speed up construction timelines.
Supporters say combining additional funding with regulatory reforms could unlock thousands of homes that are already planned and approved — potentially helping the state make meaningful progress toward addressing its housing shortage.
Originally reported by Demetria C. Lester in The Mortgage Point.
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