Addressing California’s Housing Crisis: Providing Homes for our Essential Workforce

Catalyst Housing Group
6 min readApr 25, 2022
Essential housing is key to solving California’s housing crisis

World renowned for its entertainment, technology and agricultural industries, California is making great strides towards becoming better recognized for something far less sunny — its crushing housing crisis. California’s apartment rents are at record levels, its home prices are unattainable to the masses, and a hollowing of the state’s middle class is well underway as those with means seek more sustainable lives in friendlier housing climates.

Myriad factors have played leading roles in developing the Golden State’s dramatic housing picture including zoning restrictions, environmental legislation, organized labor, construction costs, geographic constraints, and the continual overabundance of California’s prized growth crop — “NIMBY” or “not in my backyard” protectionists. These dynamics have contributed to cement a housing shortage that recent studies have estimated to be in the millions of units. For a state that historically permits closer to 100,000 housing units annually (and delivers a fraction thereof), tangible solutions to building ourselves out of this supply predicament are nowhere in sight.

Housing Production Challenges

Multifamily housing production in California typically follows consistent patterns. Low-Income Housing Tax Credits (LIHTC) and related government subsidies spur the construction of deeply affordable apartment developments, while profit-motivated capital honors its fiduciary responsibilities to deliver luxury market-rate rental communities that maximize monthly rents. What results is a housing “barbell” that fails to deliver rent-restricted housing for anyone in the middle.

Decades of compounding production shortfalls have inflated housing costs at rates that far exceed historical income growth experienced by average Californians. In addition to the more widely recognized housing crisis affecting extremely low-income residents and those experiencing homelessness, our state’s nurses, teachers, first responders, and other essential workers are continually falling further behind as the cost of securing housing consumes ever-increasing portions of their paychecks. This critical cohort generally out-earns the income limits of most subsidized affordable housing developments yet find themselves priced out of the very communities they serve.

198-Unit Essential Housing, Summit at Sausalito Apartments, Sausalito, CA

One clear sign of the long-term ramifications of our perpetual underbuilding is that California now possesses many of the largest super-commuting regions in the country. Our middle-income workforce increasingly spends significant portions of their lives traveling between their jobs and housing markets they can reasonably afford. California’s housing production failures are now directly contributing to a growing environmental crisis caused by excessive commuting patterns and related carbon emissions.

Catalyst’s Origins

Catalyst was formed in direct response to perverse incentives and misaligned interests that have historically plagued the housing industry. When formally launching in 2015, our simple (and in hindsight, naïve) goal was to bring financial innovation and differentiated balance sheets to the world of housing production. Shortly after committing to our initial transactions — three highly structured mixed-income LIHTC developments — we painfully arrived at the conclusion that we would only accomplish our foundational goals if unbound by traditional affordable housing financing confines. Our primary focus required an immediate pivot from the uncertain world of competing for perpetually underfunded allocations of tax credits and subsidy dollars to forging programmatic capital market innovations with the potential of producing rent-restricted housing at scale — and for wider segments of the population.

Catalyst’s future became clear following two long years of detailed discussions with government officials, public finance attorneys, municipal bond bankers, multifamily developers, LIHTC investors, and housing consultants. California was failing its essential middle-income workforce, and we believed we had uncovered a scalable solution. Our scoping exercises identified opportunities to connect unique aspects of the California Constitution, municipal finance, and tax law to produce government-owned rent-restricted housing that produced significant and tangible public benefits. Residents would immediately gain access to quality housing at below-market rates, and local governments would be granted all future financial upside. Our core focus immediately shifted to building this open-source infrastructure empowering the production and preservation of middle-income housing throughout the state — an entirely new asset class we dubbed “Essential Housing.”

Essential Housing is Key

Since crystalizing our Essential Housing model and closing our first transactions in 2019, Catalyst has partnered with two governmental agencies and 11 cities and counties to acquire nearly 4,200 housing units throughout the state. These previously market-rate and privately owned rental communities are now controlled by California state agencies and carry strict regulatory agreements limiting new leases to qualified low-income and moderate-income households.

Catalyst currently oversees the operation and conversion of 14 Essential Housing communities throughout California. While primarily acquired in 2021, this portfolio already provides 16% discounts to competing market-rate properties. In gross dollars, this amounts to $22 million of annual housing subsidies. For the first time in decades, thousands of our state’s essential workers are finding pathways to live, work and thrive closer to family and friends, and directly within the communities that most depend upon them.

Catalyst Housing Group Essential Housing Asset
Mira Vista Hills, Antioch, CA

Perhaps more impactful than the portfolio we’ve assembled directly is that others have leveraged our financial innovations to rapidly preserve nearly 10,000 additional governmentally owned middle-income housing units throughout California. In 2021 alone, the $7 billion of Essential Housing transactions closed by the three most active state agencies delivered rent-restricted units at more than twice the pace of the LIHTC development our industry typically relies upon for affordable housing production.

Preservation Alongside Production

Many recently proposed housing bills have targeted the elimination of strict local controls and other NIMBY tactics commonly used to slow housing development throughout the state. In an ideal world, California developers will be provided with future opportunities to build new units at levels required to make meaningful dents in our state’s housing shortfall. Until then (we aren’t holding our collective breath), preservation tools like our Essential Housing model will continue to be one of the only scalable solutions for protecting our essential middle-income workforce from the rampant displacement and runaway rent growth currently impacting their lives and the sustainability of our communities.

While Catalyst is supportive of scaled production methods and streamlined approvals processes, we have also intentionally partnered closely with local governments. We always seek to ensure that our Essential Housing assets are delivering impactful public benefits that match nuanced local needs. In addition to imposing restrictions that govern initial and future affordability levels, our state agency partners execute public agreements that grant all future controls and financial upside to underlying jurisdictions. We conservatively estimate the value this future transference of embedded equity to exceed $15 billion across the ~14,000 Essential Housing units preserved to date. The cities and counties we have partnered with will ultimately determine whether these valuable assets are perpetually publicly owned, assigned to longstanding affordable housing nonprofits, restricted to provide deeper affordability, refinanced to invest in other housing needs and/or contributed to community land trusts, among other flexible options.

Catalyst is incredibly proud of our early financial innovations. In our view, Essential Housing is not an investment strategy, but critical public infrastructure necessary for the proper functioning of the world’s fifth largest economy. We believe that the future of California hinges on adequately housing our middle-income workforce and we hope that we have kickstarted a flywheel with the momentum to do just that.

Jordan Moss is the Founder of Catalyst Housing Group, a mission-driven affordable housing provider investing at the intersection of innovation and impact. Founded in 2015, Catalyst addresses wealth and opportunity gaps through the scaled delivery of pioneering capital solutions that empower generational change for its residents and communities.



Catalyst Housing Group

Catalyst is a mission-driven housing provider investing at the intersection of innovation and impact.