BILL ANALYSIS
SB 454
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SENATE THIRD READING
SB 454 (Lowenthal)
As Amended May 27, 2010
Majority vote
SENATE VOTE :34-0
LOCAL GOVERNMENT 9-0 HOUSING 8-0
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|Ayes:|Smyth, Caballero, |Ayes:|Torres, Arambula, |
| |Arambula, Bradford, | |Bradford, Eng, Gilmore, |
| |Davis, Knight, Logue, | |Knight, Torlakson, Tran |
| |Solorio, Swanson | | |
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APPROPRIATIONS 17-0
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|Ayes:|Fuentes, Conway, |
| |Bradford, |
| |Charles Calderon, Coto, |
| |Davis, |
| |De Leon, Gatto, Hall, |
| |Harkey, Miller, Nielsen, |
| |Norby, Skinner, Solorio, |
| |Torlakson, Torrico |
| | |
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SUMMARY : Deletes the sunset date on three sections of law
requiring the owners of affordable housing to provide notice to
tenants and governmental entities before converting a property
to market rate and giving a limited priority to preservation
purchasers in the event the owner wishes to sell, and makes
minor changes to the requirements.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, minor and absorbable costs to the Department of
Housing and Community Development (HCD) to approve notice forms
and maintain lists of prospective preservation purchasers.
COMMENTS : Since the 1960s, developers have constructed at least
425,000 units of affordable rental housing in California with
the assistance of federal, state, and local subsidies that
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require owners to maintain rents at affordable levels for
specified periods of time. Examples of such subsidy programs
include project-based Section 8, Federal Housing Administration
(FHA) mortgages, low-income housing tax credits, the state's
Multifamily Housing and Farmworker Housing Grant programs, and
city and county redevelopment funds. The affordability
restrictions on assisted units typically last 30 to 55 years,
depending on the program. Once affordability obligations
expire, owners may preserve the affordability of the units by
renewing assistance or by refinancing with new public subsidies,
or they may convert the development to market rate. Under some
federal programs, owners can also terminate affordability
restrictions early by prepaying the mortgage or opting out of
the rental assistance contract. According to the
state-chartered California Housing Partnership Corporation,
California has already lost more than 20,000 units of housing
affordable to low-income households to such market rate
conversions, and 82,000 more units are considered at risk of
conversion in the next five years.
Existing law requires that a property owner cannot convert an
affordable property to market rate without first providing
notice to tenants, local and state governments, and potential
preservation purchasers (i.e., those who may wish to purchase
the development in order to 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 more detailed
information at least six months prior to conversion. An owner
may satisfy this 12-month notice requirement by providing
recipients with a federally required notice.
At least six months prior to conversion, the owner must then
provide these same recipients with a second, more detailed
notice that includes: the anticipated date of conversion; the
current rent and the anticipated rental rate for the first year
after conversion; statement of the owner's intention to
participate in any replacement subsidy program; and contact
information for the local government, HCD, and legal services
organizations for tenants to obtain more information about their
rights. In addition, the owner must provide HCD and the local
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government with information on the number of affected units,
bedrooms, and tenants and on the ages and incomes of these
tenants.
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 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, 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 makes permanent these notice requirements and priority
purchase provisions by deleting the January 1, 2011, sunset
date. The bill also restructures the section of law that lists
what an owner must include on the statement of "initial notice
of a bona fide opportunity to submit on offer to purchase" and
exempts developments in which 25% or less of the units are
affordable from the financial disclosure requirements. In
addition, the bill allows a corporation or a public entity to
share information that is compiled from these financial
disclosure requirements with prospective purchases without the
requirement to sign a confidentiality agreement as long as the
information is used for the purpose of attempting to preserve
the affordability of the property.
Analysis Prepared by : Anya Lawler / H. & C.D. / (916)
319-2085
SB 454
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FN: 0005692