California Housing Finance Authority providing $7.5m

"The California Housing Finance Agency is offering $7.5 million in low-interest loans to help promote affordable housing projects in the state, the agency announced Monday."

"California cities, counties and housing agencies can apply for loans with an interest rate of 3.5 percent to assist in the acquisition, development or preservation of affordable rental housing... Applications must be submitted to CalHFA by 5 p.m., Oct. 20, 2006."

Many of the state affordable housing agencys are having a lot of problems. Foreclosures have been rising (especially in the north east), and the money is not able to help as many people. As less loans are able to be subsidized (since the money is tied up with losses on other loans), housing demand will be reduced. States with the largest affordable housing programs may see large housing price declines if they do not increase affordable housing funding over the next couple years. It is a bad cylce of:

Price declines -> Increased foreclosures -> Affordable Housing Authority loses money on foreclosures -> Housing demand is reduced since AHA doesn't have money to give -> Prices decline....