Administration seeks legislative approval to split Business, Consumer Services and Housing agency into separate housing and consumer-focused agencies

Subcommittee 4 of the Senate Budget and Fiscal Review Committee heard presentations on the governor's proposed reorganization of the Business, Consumer Services and Housing (BCSH) agency, including creation of a California Housing and Homelessness Agency (CHHA), a separate Business and Consumer Services Agency (BCSA), and a Housing Development and Finance Committee (HDFC).

The change, presented as part of the May revision, would split housing and homelessness functions into a single cabinet-level agency and move business and consumer regulation into a separate, more narrowly focused agency. “This proposal makes key structural changes to increase our ability to provide positive impact for Californians across our entire portfolio,” Secretary Tamika Moss said, adding the reorganization would let each secretary “devote their time to a narrower policy focus, lead more specialized staff, and policy expertise.”

Why the proposal matters: supporters say a split will concentrate leadership and program delivery for housing and homelessness at the cabinet level and create a single forum — the Housing Development and Finance Committee — to harmonize disparate affordable housing finance programs. Gustavo Velasquez, director of the Department of Housing and Community Development (HCD), told the subcommittee that HCD has funded nearly 60,000 affordable homes during his tenure and that a dedicated housing-and-homelessness cabinet office would “provide dedicated leadership and focus on housing and homelessness at the cabinet level.”

Concerns and timing: Paul Steinhausen of the Legislative Analyst’s Office (LAO) urged caution on funding the reorganization in the May revision, noting the Little Hoover Commission has until June 4 to report on the plan and the Legislature has until July to decide the reorganization’s fate. “Approving this proposed May revision funding for the June budget before the Legislature decides its position on the plan is putting the cart before the horse,” Steinhausen said. He recommended the Legislature reject the administration’s funding request without prejudice and consider it later in the budget process.

Subcommittee members expressed mixed views. A member who described themselves as a Little Hoover Commission legislator said they had not supported the plan at the commission level and questioned whether organizational change would solve policy or execution problems. Others, including Moss and Velasquez, said the reorganization is required so the state can coordinate dozens of housing programs and better deploy billions of dollars in the pipeline.

Costs and staffing: Administration witnesses said they had minimized initial staffing requests, relying on existing staff for much of the transition. The deputies said the plan asks for a small number of additional administrative positions partway through the first year, with a limited set of new positions for the Housing Development and Finance Committee (about five). During the hearing one member referenced startup estimates mentioned in the record: “The start up costs are $4,000,000 and then $6,000,000 ongoing,” a point discussed by the subcommittee. The administration characterized some startup costs as one-time (facilities, change-management contracts) and said ongoing costs reflect necessary permanent positions for the new agencies.

What would HDFC do: Administration witnesses described HDFC as the infrastructure to “integrate, harmonize, consolidate” financing programs that now sit in multiple departments and offices. The committee would convene stakeholders, set criteria, develop a single application for some funding pools, and — in time — accept combined applications and vote on award criteria in a way that proponents say will reduce duplicative steps and lower per-unit costs.

Next steps: Subcommittee members left the item open for further work and asked staff to prepare draft language tying reorganization implementation to funding levels and to avoid creating a reorganization without money to operate critical housing programs. The LAO recommendation to defer funding until after the Little Hoover Commission’s report and the Legislature’s July decision was a central point of contention during questioning.

Ending: The subcommittee did not take a vote on the reorganization during the hearing. Members said they will continue negotiations, including possible substitute language and funding conditions, before the subcommittee reports recommendations to the full committee.