Finance and Capital Strategies committee approves several housing and budget items; regents press for details on loan assumptions and construction interest

The Finance and Capital Strategies Committee met in a joint session and approved several consent and action items related to campus housing and capital projects. Committee members also heard a systemwide state-budget briefing and discussed implications for operating budgets.

Votes at a glance (committee actions): - F1a (consent item): Approved by committee (no substantive discussion recorded). - F2 University Hills (UC Irvine): The committee approved continuing the University Hills residential densification project (replace older apartments with denser townhouse-style for-sale and for-rent units). Committee members asked for additional data on occupant mix (faculty vs. staff) and on loan-eligibility assumptions. The motion passed. - F3 Promise Housing Project (UC Merced): The committee approved full budget and external financing for the Promise Housing Project, an intersegmental collaboration with Merced Community College meant to provide below-state-maximum rents to qualifying low-income transfer students; funding is to come from external financing supported by the State Higher Education Student Housing Grant Program. The motion passed. - F4 Student Housing Project (campus identified in the record as the "San Benito" student housing project): The committee approved a $624,400,000 externally financed student-housing project (2,224 undergraduate beds) and instructed staff to validate that interest during construction is included in the budget before the full board vote the next day. Committee members confirmed that approximately 50% of subcontractor bids were in hand at the time of the committee meeting and that the campus would receive most remaining bids that afternoon. The motion passed.

What regents pressed the presenters to clarify: - Mortgage assumptions at UC Irvine: Regent Rejib Bihari noted a discrepancy between the MOP loan rate used in University Hills capacity calculations (3.25% cited in project materials) and the prevailing MOP rate near 4.5% (four-quarter average). Staff noted a mechanism (zero-interest internal "Zip Loan" for down payments) that can improve buying capacity, and committed to provide updated loan-capacity calculations and campus wait-list composition (faculty vs. staff) before the board vote. - MOP eligibility expansion request: Regents asked staff to explore expanding the MOP (Mortgage Origination Program) loan eligibility to nonrepresented staff to improve affordability, capture internal interest revenue and support employee retention. - Capitalized interest for large student housing project: During the student-housing project discussion, committee members observed that the attachment in the materials showed zero for interest during construction; staff clarified they intend to capitalize interest into the financed amount and committed to confirm the line-item treatment and the likely magnitude of construction interest (estimate cited in committee discussion: on the order of tens of millions of dollars).

Other items discussed: - State budget briefing: UC finance staff presented the governor's proposed 2025-26 budget, which proposes a 7.95% reduction to UC's ongoing budget in 2025-26 (about $395 million) with partial restorations and deferrals in subsequent years. Staff warned ongoing state-level deficits and budget uncertainty may affect affordability and campus operations; teams were forming a systemwide budget-management work group to identify efficiencies.

Next steps and follow-ups requested by committee: - UC Irvine to provide updated MOP loan-capacity calculations based on current interest rates and to report the breakdown of University Hills occupants (faculty vs. staff) before the full-board vote. - Staff to confirm and, if needed, amend the student-housing project's sources and uses to explicitly show capitalized construction interest before the full-board vote. - Staff and regents to explore systemwide options for expanding internal mortgage programs to nonrepresented staff and to evaluate pilot models for broader affordable housing access.