At its Feb. 20 meeting, the California Housing Finance Agency reviewed the state of its Mixed Income Program, which staff said has financed 71 projects and helped create more than 11,600 housing units since the program began.

The presentation, led by Stephanie McFadden, CalHFA director of multifamily programs, and Steve Gallagher, housing finance chief, summarized the program’s history, noted recent term‑sheet changes for MIP 25 and asked the board to set one to three high‑level priorities for the program at a March workshop to guide staff policy changes for MIP 26.

“Since 2019, CalHFA has helped to build 11,600 units through this program,” McFadden said, calling MIP “a really successful multifamily lending program for CalHFA and the affordable housing industry in California.” Gallagher traced the program’s origin to the 2017 Senate Bill 2 appropriation, saying the program was seeded with SB 2 (the Building Homes and Jobs Act) funds and expanded later by AB 101. Gallagher said program design has shifted over time — including adoption of a CalHFA permanent‑loan pairing requirement, introduction of very‑low‑income set‑asides and changes to per‑project caps — as staff have tried to stretch scarce subsidy dollars.

The briefing included outcome metrics staff put on the record: roughly $1.3 billion in permanent loans executed for MIP projects and about $400 million in direct MIP subsidies to date. Staff also described program rule changes over the years: pairing MIP subsidy with CalHFA permanent loans, a sponsor cap on awards, per‑project caps that were lowered after an infusion of funds, and a recurring 10% very‑low‑income unit requirement in recent rounds.

Directors pressed staff on tradeoffs and policy objectives. Director Prince asked the board to “think about the waivers,” citing concerns about developer fee waivers and whether CalHFA’s subsidy terms are producing the most efficient public outcomes. “I would like to really think about the waivers…particularly the developer fee waiver and priority for that to be repaid,” Prince said. Director Sotelo urged a data‑driven review of program impacts, asking staff to analyze whether MIP subsidies are filling gaps that truly lack other funding sources or instead are changing the capital stack for projects that would have proceeded with other public resources.

Staff said some policy tradeoffs are already visible in underwriting practice. McFadden and Gallagher described three frequent exceptions staff see in underwriting: density bonus agreements that trigger stand‑still arrangements; requests to prioritize deferred developer fee repayment (equity investors sometimes require deferred developer fee to be paid before 100% residual flow to the MIP lender); and limits on the MIP loan’s repayment at maturity given conservative exit assumptions. Gallagher said staff often mitigate the repayment risk by requiring a general partner contribution commitment at maturity and by conducting conservative exit analyses (typically stress testing a 3% higher interest rate and a 2% higher cap rate in exit scenarios).

Directors also discussed geographic distribution, county caps and timing. Staff said MIP projects have reached 22 counties and that MIP 25 includes an administrative exemption so Los Angeles County projects affected by recent wildfires can be considered outside the usual county cap. McFadden noted the program timeline: MIP 25 term sheet was released, applications are due March 10, staff expects to announce awards in early April and will target CDLAC round 2 allocations. Staff asked the board to provide policy priorities in March so staff can incorporate them into MIP 26 design.

Board members repeatedly asked for more data. Directors requested: a) an analysis showing how much of each project’s funding gap was caused by higher affordability requirements versus lack of other funding sources; b) trending data on developer fees and the effect of exceptions to repayment policy; and c) counts of how many applications are turned away (staff said historically the program says no to roughly two to three projects for every one it funds in a round). McFadden agreed to return with additional data and a focused policy package at the March workshop.

Why this matters: MIP is one of CalHFA’s largest multifamily subsidy tools and — because the loans are paired with CalHFA permanent financing — the program directly increases the agency’s multifamily balance sheet and exposure. With SB 2 revenues down and state tax credit allocations uncertain, directors said they want clearer policy objectives to guide scarce subsidy allocation.

Next steps: Staff will bring detailed data and draft policy options to a March board retreat session and will continue to bring individual deals to the board for approval under the posted MIP 25 terms.