BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 454 (Lowenthal) Hearing Date: 01/19/2010 Amended: 12/17/2009 Consultant: Mark McKenzie Policy Vote: T&H 8-0 _________________________________________________________________ ____ BILL SUMMARY: SB 454 would indefinitely extend specified requirements related to government-subsidized rental housing programs. Specifically this bill would: Permanently extend a requirement for the owners of government-subsidized rental housing to provide notice to tenants and local governments prior to the expiration or termination of affordability requirements and conversion to market rates. Permanently extend a requirement for owners of affordable housing to provide limited priority to specified prospective purchasers who would preserve the affordability restrictions. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund HCD administration absorbable costs to approve notice forms,Special and compile and maintain lists of prospective preservation purchasers ____________ * Various special funds associated with affordable housing programs _________________________________________________________________ ____ STAFF COMMENTS: Existing law, until January 1, 2011, requires the owner of government-subsidized affordable rental housing to provide notice to tenants, local and state governments, and potential purchasers who would preserve the affordability restrictions. The owner must provide a first notice at least 12 months prior to conversion informing recipients of the possibility that the development will convert, that affordability restrictions may be lost, whether other governmental assistance will be available to tenants at the time of conversion, and that the owner will provide a second notice at least six months prior to conversion. The second notice must include more detailed information regarding the date of conversion, current and anticipated rental rates, a statement of whether the owner intends to participate in any replacement subsidy program, and specified contact information for tenants to obtain information about their rights. During this one-year notice period, current law also provides preservation purchasers with limited priority to purchase the property if the owner is inclined to sell. Prior to or concurrent with the delivery of the 12-month notice described above, the owner must notify prospective preservation purchasers who have contacted the owner directly or who are on a list maintained by Department of Housing and Community Development (HCD) of the opportunity to submit a purchase offer. The owner is not required to accept any offer but may only accept offers from preservation purchasers for 180 days after the purchase offer notice. If the owner rejects a purchase offer during this time, Page 2 SB 454 (Lowenthal) the owner must give the preservation purchaser who made the offer an opportunity to match and preempt any offer from a non-preservation purchaser accepted during the second 180 days after the purchase offer notice. These requirements and priorities also apply if an owner seeks to sell or otherwise dispose of a property that is eligible for conversion in the next five years. In general, an owner is exempt from both the notice requirements and priority purchase provisions if he or she or a successor owner agrees to retain existing tenants and extend the affordability of the units for at least 30 years. SB 454 would eliminate the January 1, 2011 sunset on the notice and priority purchase provisions. Under these provisions, HCD is required to: approve the forms used by owners to comply with the notice requirements; maintain a summary of rights and obligations of owners, tenants, and other entities with an interest in preserving affordable housing; and compile, maintain, and update a list of entities that have an interest in participating in the right of first refusal program. HCD indicates that any costs associated with permanently extending these requirements would be absorbable.