BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 586|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
UNFINISHED BUSINESS
Bill No: SB 586
Author: Dutton (R), et al
Amended: 9/7/07
Vote: 27 - Urgency
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-1, 4/17/07
AYES: Lowenthal, Ashburn, Cedillo, Corbett, Dutton,
Harman, Oropeza, Simitian, Torlakson
NOES: McClintock
NO VOTE RECORDED: Kehoe
SENATE APPROPRIATIONS COMMITTEE : 16-0, 5/31/07
AYES: Torlakson, Cox, Aanestad, Ashburn, Cedillo, Corbett,
Dutton, Florez, Kuehl, Oropeza, Ridley-Thomas, Runner,
Simitian, Steinberg, Wyland, Yee
NO VOTE RECORDED: Battin
SENATE FLOOR : 36-1, 6/28/07
AYES: Aanestad, Ackerman, Alquist, Ashburn, Calderon,
Cedillo, Cogdill, Corbett, Correa, Cox, Denham, Ducheny,
Dutton, Florez, Harman, Hollingsworth, Kehoe, Kuehl,
Lowenthal, Machado, Maldonado, Margett, Migden, Negrete
McLeod, Oropeza, Padilla, Perata, Romero, Runner, Scott,
Steinberg, Torlakson, Vincent, Wiggins, Wyland, Yee
NOES: McClintock
NO VOTE RECORDED: Battin, Ridley-Thomas, Simitian
ASSEMBLY FLOOR : 70-6, 9/10/07 - See last page for vote
SUBJECT : Proposition 1Cs Affordable Housing Innovation
Fund
CONTINUED
SB 586
Page
2
SOURCE : Author
DIGEST : This bill programs the $100 million available
from the Proposition 1C Affordable Housing Innovation Fund
for four distinct purposes.
Assembly Amendments (1) required, as it pertains to the
Local Housing Trust Fund Program, the Department of Housing
and Community Development (HCD) to make available 50
percent of the grant money exclusively for newly
established housing trust funds, (2) created the Innovative
Homeownership Program, which the bill requires HCD to
develop and implement as specified, and provide $10 million
for this program, (3) deleted funding for the Mobilehome
Park Resident Ownership Program, and (4) deleted the
proposed School Housing Program and its proposed funding.
ANALYSIS : In November 2006, California voters approved
Proposition 1C, the $2.85 billion Housing and Emergency
Shelter Trust Fund Act of 2006. Included within the
housing bond act is a $100 million Affordable Housing
Innovation Fund to be "expended for competitive grants or
loans to sponsoring entities that develop, own, lend, or
invest in affordable housing and used to create pilot
programs to demonstrate innovative, cost-saving approaches
to creating or preserving affordable housing."
The bond act further provides that expenditure of these
funds is subject to specific criteria establishing
eligibility for and use of the funds to be approved by a
two-thirds vote of each house of the Legislature. In the
event that moneys within this fund are not encumbered
within 30 months of availability, they shall revert to the
CalHome Program which provides grants and loans to help
low-income households become or remain homeowners.
Under existing law, HCD administers the Local Housing Trust
Fund Matching Grant (LHTF) program to match contributions
to local housing trust funds. To be eligible for matching
funding, a local housing trust fund must receive annual
contributions for at least five years from private or
governmental sources that are not otherwise restricted for
SB 586
Page
3
housing programs. The grantee must also have an
HCD-approved housing element, or if a non-profit, fund
projects located in communities with approved elements.
The grant from HCD matches the local contributions on a
dollar-for-dollar basis at a minimum of $1 million and up
to a maximum of $2 million. The local housing trusts may
in turn use program funds to support emergency shelters,
rental housing, and for-sale housing for households ranging
from extremely low-income to moderate-income.
HCD also administers the Mobilehome Park Resident Ownership
Program (MPROP) under current law. This program finances
the conversion of affordable mobilehome parks to ownership
or control by resident organizations, nonprofit housing
sponsors, or local public agencies. MPROP provides three
separate products: (1) short-term conversion loans to
resident organizations, non-profit corporations, or local
governments, (2) long-term blanket loans to resident
organizations or non-profit corporations that purchase
parks without subdividing them, and (3) individual loans to
eligible lower-income residents in parks that have received
an MPROP loan commitment. Both a local public entity and a
qualified non-profit applicant must show that the park will
contain at least 30 percent low-income residents. Parks
owned by resident organizations must have, at a minimum,
one low-income resident.
This bill allocates the $100 million in the Affordable
Housing Innovation Fund, as follows:
1. Provides $50 million for the Affordable Housing
Revolving Development and Acquisition Program (Program)
established by this bill. Of that amount, $25 million is
made available to the "Loan Fund" and $25 million is
made available to the "Practitioner Fund."
2. Allows HCD to administer the program for 24 months after
adoption of guidelines and regulations.
3. Provides that the Loan Fund is created for the purpose
of providing loans to purchase real property for the
development or preservation of housing affordable to
lower-income households.
SB 586
Page
4
A. Requires HCD, to select by competitive
application, a private sector entity to manage the
Loan Fund for five years with options for extending
the agreement in five year increments.
B. Requires the fund manager to submit a detailed
business plan detailing how the manager intends to
meet the requirements of the Loan Fund.
C. Requires the fund manager to meet the following
criteria:
(1) Be a nonprofit lender with experience making
similar loans in California.
(2) Have originated and serviced loans totaling
at least $30 million for the development and
acquisition of affordable housing, with a minimum
of $10 million in acquisition loans.
(3) Have at least $25 million of its own capital
invested in loans to affordable housing
developers.
(4) Have originated loans of at least $25
million using bank or other investor capital.
D. Requires the fund manager to review and approve
loan applications and originate and service loans.
E. Allows applicants to apply to the fund manager for
loans to purchase real property for the development
or preservation of affordable housing.
F. Requires loan applicants to demonstrate sufficient
organizational capacity to carry out the proposed
development project, demonstrate the support of the
relevant local government for the proposed project,
match the loan with outside funding in a ratio of at
least three to one, and have completed at least five
housing developments with each project containing at
least 40 percent of the units sold as affordable
housing.
SB 586
Page
5
G. Requires loans made under this program to be for
no more than five years.
H. Requires HCD to adopt regulations and guidelines
establishing the minimum criteria required of the
fund manager and loan applicants, describing the
point system for ranking loan applications and giving
priority to applicants that commit to the greatest
level of affordability. The guidelines and
regulations shall also provide that any state funds
be reimbursed to the state if the property is sold or
transferred for purposes other than affordable
housing. Additionally, HCD shall establish a
reasonable administrative fee.
I. Provides that any funds not lent by the fund
manager within 48 months shall be transferred to the
CalHome Program.
4. Creates the Practitioner Fund for the purpose of
purchasing real property for the development or
preservation of housing affordable to low- and
moderate-income households.
A. Requires loans under this program to be for a
maximum of five years.
B. Requires HCD to issue a request for qualifications
and for the department's Loan and Grant Committee to
select one or more nonprofit entities that meets the
following criteria:
(1) Prior housing development experience in
California, with at least 25 employees.
(2) Additional available funds of at least three
times the loan amount.
(3) Completed at least 2,500 total housing units
with each housing project having a majority of the
units affordable to low and moderate income
families.
(4) Sufficient organizational stability and
SB 586
Page
6
capacity to use the Practitioner Fund to achieve
scale economies in the development and
preservation of affordable housing.
(5) Assets worth at least $200 million.
C. Requires HCD to adopt regulations and guidelines
establishing the minimum criteria required of the
practitioner, describing the point system for ranking
applicants and giving priority to those applicants
who demonstrate an immediate need of funds and who
can demonstrate the greatest levels of efficiency and
economies of scale. Additionally, HCD may establish
a reasonable administrative fee.
D. Requires that funds not lent by a practitioner
within 36 months shall be transferred to the Loan
Fund.
E. Requires the guidelines and regulations to require
the borrower to show commitments of a $3 match from
nonstate funds for every $1 of loan funds under these
two programs.
F. Requires nonstate funds be committed for a term at
least equal to the term of the state loans.
G. Provides that tax credits shall not be considered
nonstate capital.
H. Provides that if the matching fund requirements
are not met within 180 days after selection, the loan
shall be repaid to HCD.
I. Provides that if after 270 days there are no
remaining qualified project sponsors for the
Practitioner Fund, funds shall be made available for
the Loan Fund.
J. Requires HCD to establish a schedule for the
timely expenditure of funds by the project sponsor.
5. Requires HCD to include a general description of
activities undertaken pursuant these provisions in its
SB 586
Page
7
annual report to the Legislature in 2013.
6. Provides $35 million for the existing Local Housing
Trust matching grant program. Requires that half of the
funds be made available for newly established housing
trusts. Requires HCD to grant preference to trust funds
that agree to expend more than 65 percent of the state
funds for downpayment assistance to first time
homebuyers, and requires HCD, when making grants to
newly established trust funds, to set aside funding for
36 months from the date the funds are first made
available for newly established trust funds in counties
of less than 425,000 persons.
7. Provides $5 million for the Construction Liability
Insurance Reform Pilot Program established by this bill.
Provides grants to promote best practices for
residential construction quality control as a means of
reducing insurance rates for condominium developers.
Grants may be used for predevelopment costs of
affordable condominium projects funded by HCD or the
California Housing Finance Agency that utilize enhanced
construction oversight and monitoring programs.
8. Provides $10 million to the Innovative Homeownership
Program to be designed and administered by HCD to
increase or maintain affordable homeownership
opportunities for Californians with lower incomes.
Requires HCD to include in its annual report to the
Legislature how funds were spent during the previous
year and such expenditures are consistent with the
intent of Proposition 1C.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09
2009-10 Fund
HCD administration $870 $400
SB 586
Page
8
$400Bond*
* Affordable Housing Innovation Fund
ASSEMBLY FLOOR :
AYES: Adams, Aghazarian, Arambula, Bass, Beall, Benoit,
Berg, Berryhill, Blakeslee, Brownley, Caballero, Charles
Calderon, Carter, Cook, Coto, Davis, De La Torre, De
Leon, DeSaulnier, Dymally, Emmerson, Eng, Evans, Feuer,
Fuentes, Fuller, Galgiani, Garcia, Garrick, Hayashi,
Hernandez, Horton, Houston, Huff, Huffman, Jeffries,
Jones, Karnette, Keene, Krekorian, Laird, Leno, Levine,
Lieber, Lieu, Ma, Mendoza, Mullin, Nakanishi, Nava,
Niello, Parra, Plescia, Portantino, Price, Sharon Runner,
Ruskin, Salas, Saldana, Smyth, Solorio, Soto, Spitzer,
Swanson, Torrico, Tran, Villines, Walters, Wolk, Nunez
NOES: Anderson, DeVore, Duvall, Gaines, La Malfa, Silva
NO VOTE RECORDED: Hancock, Maze, Strickland, Vacancy
JJA:mw 9/11/07 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
**** END ****