BILL ANALYSIS AB 1865 Page 1 Date of Hearing: April 28, 2010 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair AB 1865 (Strickland) - As Introduced: February 12, 2010 Policy Committee: Housing and Community Development Vote: 9 - 0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill reduces the amount of matching funds an applicant for a newly formed Local Housing Trust Fund (LHTF) Matching Grant Program grant must raise, from a minimum of $1 million to $500,000. FISCAL EFFECT 1)$16.275 million in Proposition 1C is currently set aside for newly established local trusts. In October 2008, HCD issued a Notice of Funding Availability (NOFA) for roughly one-third ($5.4 million) of the new trust fund money. However, before any funding could be awarded, the Department of Finance (DOF) imposed a freeze on all awards. Prior to that freeze, the Department of Housing and Community Development (HCD) had not received any applications for new local trusts. Absent this legislation, it is unlikely that HCD will be able to award all of the funding. 2)Costs of incorporating this change into the next notice of funding availability (NOFA) for LHTF would be minor and absorbable within HCD's resources. COMMENTS 1)Rationale . This bill seeks to allow all newly formed housing trusts to better compete for state housing trust fund grants by lowering the minimum grant amount for all newly established trusts, not just those in smaller cities or counties. Newly formed trusts would be required to provide a match of $500,000 rather than $1 million. Reducing the match amount required AB 1865 Page 2 from all newly formed trusts, regardless of whether they are in a smaller city/county, will allow more local housing trust funds to apply for the funds. According to the author, this change will not only support affordable housing production in the state, but also result in new construction jobs. 2)Background . In November 2006, California voters approved Proposition 1C, the $2.85 billion Housing and Emergency Shelter Trust Fund Act of 2006. The bond act included $100 million for the affordable housing innovation fund and required that the Legislature program the specific uses and eligibility requirements for these funds. SB 586 (Dutton: Chapter 652, Statutes of 2007) allocated these funds to four separate programs, including $35 million for the LHTF program, administered by HCD. The LHTF program matches contributions to local housing trust funds. The grant from HCD matches the local contributions on a dollar-for-dollar basis from a minimum of $1 million to a maximum of $2 million. The local housing trusts may use program funds to support emergency shelters, rental housing, and for-sale housing affordable to households ranging from extremely low-income to moderate-income. Under SB 586, half of the $35 million allocated to this program by Proposition 1C is reserved for newly established housing trust funds. Within this allocation is a set-aside for an amount to be determined by HCD for trust funds in counties with a population of less than 425,000 persons. 3)Related Legislation . AB 570 (Arambula; Chaptered 95, Statutes of 2009) reduced the amount of matching funds newly established housing trust funds in smaller communities (those with populations of less than 425,000 persons) were required to raise, from $1 million to $500,000. Analysis Prepared by : Julie Salley-Gray / APPR. / (916) 319-2081