BILL NUMBER: AB 1170 CHAPTERED 09/20/02 CHAPTER 724 FILED WITH SECRETARY OF STATE SEPTEMBER 20, 2002 APPROVED BY GOVERNOR SEPTEMBER 20, 2002 PASSED THE ASSEMBLY AUGUST 29, 2002 PASSED THE SENATE AUGUST 27, 2002 AMENDED IN SENATE AUGUST 6, 2002 AMENDED IN SENATE JUNE 13, 2002 AMENDED IN SENATE APRIL 30, 2002 AMENDED IN SENATE MARCH 21, 2002 AMENDED IN ASSEMBLY JANUARY 29, 2002 AMENDED IN ASSEMBLY JANUARY 22, 2002 AMENDED IN ASSEMBLY MAY 2, 2001 AMENDED IN ASSEMBLY APRIL 18, 2001 INTRODUCED BY Assembly Member Firebaugh (Principal coauthor: Senator Soto) (Coauthors: Assembly Members Florez, Oropeza, Salinas, and Vargas) (Coauthor: Senator Escutia) FEBRUARY 23, 2001 An act to add Chapter 14.5 (commencing with Section 50860) to Part 2 of Division 31 of the Health and Safety Code, relating to housing. LEGISLATIVE COUNSEL'S DIGEST AB 1170, Firebaugh. Housing: downpayment assistance. Existing law requires the Department of Housing and Community Development, the California Housing Finance Agency, and various other state and local agencies to administer programs to provide affordable housing through incentives to developers, rental housing assistance, and loans or grants for downpayment, interest subsidy, relocation, veterans' programs, and other home purchase assistance. Existing law requires the housing element of a local general plan to identify adequate sites for affordable housing to be made available through appropriate zoning and development standards, including those relating to density. This bill would create the Building Equity and Growth in Neighborhoods (BEGIN) Program and BEGIN Fund. Moneys in the fund would be made available, upon appropriation, to the department for grants to cities, counties, and cities and counties for assistance in the form of 2nd mortgage loans for downpayment purposes to qualifying new home buyers in those cities, counties, and cities and counties that have taken prescribed actions to remove barriers to affordable housing. This bill would specify that its provisions would become operative only if the Housing and Emergency Shelter Trust Fund Act of 2002 is enacted by the voters. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. (a) The Legislature finds and declares all of the following: (1) Home ownership is a vital piece of California's social and economic fabric and remains a top priority for new California families and individuals. (2) Home ownership has been shown to reduce crime, while increasing school retention and graduation, civic engagement, children's future earning potential, and overall life satisfaction, and promoting neighborhood stability. (3) Home equity represents two-thirds of all low-income family wealth. The median wealth of nonelderly low-income homeowners is 12 times greater than the median wealth of similar renters with the same income. (4) Yet, while more Americans (67 percent) own their homes today than in any time in American history, home ownership in California lags well behind the rest of the nation at 56 percent. (5) The home ownership rate in California is even worse for ethnic minorities. According to the California Budget Project, the rate of home ownership among Latino households is only 42 percent and only 40 percent among African-American households in the state. (6) The high cost of building homes in California is a key contributor to the state's low home ownership rate. Today, California has nine of the nation's 10 least affordable housing markets. (7) Home prices are so high in California that the average newly formed household would have to nearly double its income to qualify to buy a median-priced home. (8) While land prices in California are a key contributor to the state's low housing affordability, permitting and regulatory cost add significant costs to new housing construction. According to a recent study by Northwestern University, permitting and regulatory costs in a San Diego County community add, on average, more than $96,000 to the price of a new home. (9) According to the National Association of Home Builders (NAHB), even a small cost increase has a significant impact on affordability. An NAHB study shows that every $1,000 added to the price of a moderately priced home disqualifies as many as 49,000 California households from becoming home buyers. (b) The Legislature further finds and declares that a combination of lowering regulatory costs and increasing purchasing power for low- and moderate-income households, primarily through downpayment assistance, will significantly increase home ownership rates in California. (c) State housing element law can be complemented by the creation of incentives to promote the elimination of local constraints to the production of affordable housing. SEC. 2. Chapter 14.5 (commencing with Section 50860) is added to Part 2 of Division 31 of the Health and Safety Code, to read: CHAPTER 14.5. BUILDING EQUITY AND GROWTH IN NEIGHBORHOODS PROGRAM 50860. (a) The Building Equity and Growth in Neighborhoods (BEGIN) Program and the Building Equity and Growth in Neighborhoods (BEGIN) Fund are hereby created. (b) Except as otherwise provided in this chapter, moneys in the BEGIN Fund shall be made available upon appropriation by the Legislature to the department and administered by the department pursuant to the CalHome Program (Chapter 6 (commencing with Section 50650), to make grants to qualifying cities, counties, or cities and counties that provide incentives or reduce or remove regulatory barriers as set forth in this chapter. These grants shall, except as otherwise provided by this chapter, be used for downpayment assistance to qualifying first-time home buyers of low- and moderate-incomes purchasing newly constructed homes in a BEGIN project. (c) Any loan repayments shall be retained by the qualifying city, county, or city and county and reused for first-time home buyer downpayment assistance, home rehabilitation, home buyer counseling, home acquisition and rehabilitation, or self-help mortgage assistance for persons and families of low- or moderate-income, as defined in Section 50093. 50861. The department shall issue a notice of funding availability to all cities, counties, or cities and counties specifying when funds are available for the BEGIN Program, the terms of the program, and due date for applications. The application shall include a description of the incentives or regulatory barrier reductions or removals established pursuant to Section 50863 and a description of the incentives or barrier reductions or removals that the city, county, or city and county has provided to the identified project. 50862. A city, county, or city and county that receives a grant from the BEGIN Fund shall use the proceeds from the grant for downpayment assistance to a prospective first-time home buyer who enters into an agreement to purchase a newly constructed home, or a newly erected manufactured home placed on a permanent foundation, with the sponsor or developer of the identified newly constructed project within this city, county, or city and county provided the first-time home buyer qualifies as a person or family of low- or moderate-income, as defined in Section 50093. Any residence assisted with downpayment financing provided by the BEGIN Fund shall be continuously occupied by the home buyer as his or her principal residence for at least five years following recordation of the deed of trust. If the home buyer fails to meet this condition, the loan amount shall become immediately due and payable to the grantee city, county, or city and county. 50862.5. Downpayment assistance provided pursuant to this chapter shall be in the form of a second mortgage loan, in an amount not to exceed 20 percent of the sale price of the residence, and in no event to exceed thirty thousand dollars ($30,000). The loan shall accrue simple interest. 50863. Grants shall only be made to a qualifying city, county, or city and county that has demonstrated that it has provided incentives or reduced or removed regulatory barriers to affordable housing for an identified or specified project. The department shall establish the types of local governmental actions that it determines are appropriate and objectively measurable incentives and regulatory barrier reductions or removals. These actions may include, but are not limited to, any or all of the following measures: standards relating to housing density, project design, parking requirements, permit processing, and fee reductions. 50864. The department shall prioritize and quantify the criteria it establishes pursuant to Section 50863 by assigning points to each of the criteria. Applications of a city, county, or city and county that has a housing element that the department has found substantially complies with the requirements of Article 10.6 (commencing with Section 65580) of Chapter 3 of Division 1 of Title 7 of the Government Code shall receive additional points, not exceeding the points granted for any one of the criteria in Section 50863. Additional points may be given for applications meeting one or more of the following objectives: (a) The extent to which the project is intended to serve low-income home buyers. (b) The location of the project on a site designated as "infill." (c) The location of the project in proximity to public transit, public schools, parks, or recreational facilities. (d) The location of the project in any of the following job centers: (1) The Los Angeles and Long Beach metropolitan statistical area. (2) The Orange County metropolitan statistical area. (3) The San Diego County metropolitan statistical area. (4) The San Francisco metropolitan statistical area. (5) The Oakland metropolitan statistical area. (6) The San Jose metropolitan statistical area. (7) The Sacramento metropolitan statistical area. (8) The Fresno metropolitan statistical area. (9) The Modesto metropolitan statistical area. 50865. The department may administer the BEGIN Program through guidelines that shall not be subject to the requirements of Chapter 3.5 (commencing with Section 11340) of Part 1 of Title 2 of the Government Code, following at least one consultation with the potential beneficiaries of, and participants in, the program, including, but not limited to, representatives of local governments and homebuilders. 50866. No more than 5 percent of the funds deposited in the BEGIN Fund may be used to pay the costs of administration of this chapter. SEC. 3. Section 2 of this act shall become operative only if the Housing and Emergency Shelter Trust Fund Act of 2002, as proposed by Chapter 26 of the Statutes of 2002 (Senate Bill 1227 of the 2001-02 Regular Session) is enacted by the voters and contains authority to use bond proceeds for the purposes of this act.