On September 23, 2021, Governor Newsom signed SB 169, the higher education budget trailer bill.  SB 169 includes the creation of a new, three-year state student housing program – the Higher Education Student Housing Grant Program (“Program”) – designed to provide one-time grants for the construction of student housing or for the acquisition and renovation of commercial properties into student housing for the purpose of providing affordable, low-cost housing options for students enrolled in public postsecondary educational institutions in the State, including community colleges.  SB 169 defines “student housing project” to mean one or more housing facilities to be occupied by students of one or more campuses, including, but not limited to, dining, academic, and student support service spaces, basic needs centers, student healthcare services, and other necessary and usual attendant and related facilities and equipment. 

The Program appropriates $500,000,000 for the 2021-2022 fiscal year and intends to appropriate $750,000,000 for the 2022-2023 and 2023-2024 fiscal years, respectively, for a total of $2 billion over its three-year term.  Significantly, the Program allocates 50% of the available funds to community colleges, which may use a public-private partnership to construct, operate, and/or maintain a funded project.  In addition, community colleges may submit requests for planning grants to explore and determine if it is feasible to offer affordable student rental housing.   Up to $25,000,000 may be used to support planning grants.

Initial proposals for projects to be considered pursuant to the Program shall be submitted to the Department of Finance (“DOF”) by October 31, 2021.  DOF shall provide the Joint Legislative Budget Committee information on all submitted project proposals and a list of projects proposed for funding by March 1, 2022.

SB 169 requires student housing proposals to include certain components, including, but not limited to, goals, cost, timeline, and financial feasibility of the project.  (See Education Code section 17201(c).) 

SB 169 also provides that submitted proposals must include certain commitments, including, but not limited to, that construction on the project could begin by December 31, 2022 (or by the earliest possible date thereafter), that the available housing will first be offered to low-income students, and that any students renting housing in the funded facilities must take a minimum number of units.  (See Education Code section 17201(f).)

As for selection criteria, SB 169 states that projects that would convert commercial space into student housing and projects that would serve the greatest percentage of a campus' low-income student population may be prioritized for selection.  Project selection criteria may also include, but not be limited to, the unmet demand for student housing, with priority given to applicants with greater unmet demand, and the timeline for construction, with priority given to projects that can begin construction the earliest.  (See Education Code section 17201(g).)

Once funds are received for a project, the Board of Governors of the California Community Colleges, the Office of the Chancellor of the California Community Colleges, or each individual community college district must:

• Provide oversight of the project.
• From the receipt of funds to completion of the project, report annually to DOF and the relevant policy and budget committees of the Legislature on the status of the project.
• Following completion of the project, report annually for a five-year period to DOF and the relevant policy and budget committees of the Legislature on the public benefit provided by the project as related to the selection criteria.

In spite of the detailed Program provisions contained in SB 169, questions remain regarding the Program's implementation.  At the top of the list are the following:

1. What is the state/local share under the Program?

SB 169 is silent on the state/local share question, making it unclear if the Program is intended to fund 100% of project costs or if it will fund a share, with a local match. DOF has indicated that the Program was originally intended to provide 100% state funding, but that it will accept proposals that include a local share and leverage other funding sources.  

2. Can the Program be used to fund rehabilitation/expansion of existing student housing facilities?

SB 169 is silent on this issue as well.  The answer to this question remains outstanding.

3. What is the application process, and when will the application be available?

The final application is still in development and is expected to be released shortly by DOF.  The application should be similar to the Capital Outlay Budget Change Proposal form (“COBCP”), commonly used by the Office of the Chancellor of the California Community Colleges to submit capital outlay Final Project Proposal requests to DOF in the annual budget process.  DOF has indicated that it will also release additional guidance on how to complete elements of the application.

Parker & Covert LLP has extensive experience handling community college construction matters.  Should you have any questions or need assistance regarding the impact of the Program on your community college district, please do not hesitate to contact us via email or phone.

This Parker & Covert LLP post is intended for informational purposes only and should not be relied upon as legal advice.  Legal issues and principles apply differently, sometimes substantially, depending on context and facts.  Review or receipt of this post does not create an attorney-client relationship.