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  
                                 and compile and maintain lists of  
                                 preservation purchasers
          * Various special funds associated with affordable housing  

          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  

          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  
          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.