BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 221 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Carter VERSION: 2/1/11 Analysis by: Mark Stivers FISCAL: yes Hearing date: June 28, 2011 SUBJECT: Housing bond allocations for emergency and supportive housing DESCRIPTION: This bill allows the Department of Housing and Community Development (HCD) to expend bond funds earmarked for the Emergency Housing Assistance Program (EHAP) either for EHAP or for the Supportive Housing Program. ANALYSIS: As approved by the voters, the Housing and Emergency Shelter Trust Fund Act of 2002, Proposition 46, authorized the issuance of $2.1 billion in general obligation bonds to finance various affordable housing programs, most of which HCD administers. Among other things, Proposition 46 included funds for the following programs: $910 million for the Multifamily Housing Program (MHP), which funds the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households, through loans to local governments and developers. $195 for the Supportive Housing Program, a subprogram of MHP which funds rental homes with support services for persons who have a disability and are homeless or at imminent risk of becoming homeless. $195 for EHAP, which provides grants for the rehabilitation, renovation, expansion, and site acquisition of emergency shelters and transitional homes for homeless individuals. In November 2006, California voters approved Proposition 1C, the $2.85 billion Housing and Emergency Shelter Trust Fund Act of 2006. Among other things, Proposition 1C included funds for the following programs: $345 million for MHP. AB 221 (CARTER) Page 2 $195 million for the Supportive Housing Program. $50 million for EHAP. This bill allows HCD to expend the funds earmarked for EHAP in both Propositions 46 and 1C either for EHAP or for the Supportive Housing Program. COMMENTS: 1.Purpose of the bill . This bill seeks to expand the funding options for providers seeking to assist and serve the state's homeless population. According to the author, a substantial amount of EHAP funding remains available while the Supportive Housing Program is oversubscribed and has a limited amount of funding remaining to finance the many projects ready to go. Moreover, in recent years the focus of efforts to combat homelessness have shifted from simply providing shelter to the more comprehensive "housing first" model, in which homeless persons are placed in housing first and they encouraged to take advantage supportive services, such as drug and alcohol treatment, mental health counseling, and workforce training. These housing first projects are eligible for funding under the Supportive Housing Program but not under EHAP. Therefore, it makes sense to make the EHAP funds available for all approaches that serve homeless individuals and families. 2.Program challenges and status . Since the passage of Proposition 46 in 2002, HCD has received $320 million in applications and made $211 million in awards under EHAP. These awards have now almost completely exhausted the relatively large allocation of Proposition 46 funds for EHAP and about half of the much smaller Proposition 1C allocation. In May 2010, HCD issued a Notice of Funding Availability (NOFA) soliciting applications to award up to $40 million in EHAP funding. HCD made only $20 million in awards under this NOFA. HCD expects to offer the entire remaining $20 million in Proposition 46 and 1C EHAP funds in August of this year. In spite of the large amount of funds awarded to date, the EHAP program has had its challenges. Because these EHAP funds come from general obligation bonds, HCD can only fund capital improvements, not operating costs. Shelter operators have always had difficulty arranging operating grants, never more so than now as public and philanthropic entities cut back support. As a result, many operators are reluctant to build or expand. In addition, HCD's $1 million limit on EHAP awards AB 221 (CARTER) Page 3 may not work for larger projects that cost more than $1 million but have few other sources of revenue. While the needs of the homeless have not gone away, these factors have surely dampened demand for EHAP funds. In spite of these challenges, it appears likely that HCD will have awarded all, or close to all, of the funding available to EHAP by the end of this year, in which case this bill may become moot. 3.HCD's discretion . This bill does not require HCD to shift any funds from EHAP to the Supportive Housing Program but rather allows HCD to do so. HCD will have greater flexibility and discretion to make the funding available where it is most needed. 4.Redirecting voter-approved allocations . In general, lawyers consider the allocation of funds within voter-approved bond bills to be like a contract with the voters and believe that a reallocation of these funds requires new voter approval. Propositions 46 and 1C, however, expressly included language approved by the voters that states: The Legislature may, from time to time, amend the provisions of law related to programs to which funds are, or have been, allocated pursuant to this subdivision for the purpose of improving the efficiency and effectiveness of the program, or for the purpose of furthering the goals of the program. While this bill does not directly amend the statutes governing EHAP or the Supportive Housing Program, it effectively allows a broader use of EHAP funds to further the goal of meeting the housing needs of homeless individuals and families. 5.Previous legislation . Last year, the author introduced an identical bill, AB 2536. Governor Schwarzenegger vetoed that bill, stating: This bill would change the use of housing bonds contrary to the intent of the voters in approving Proposition 1C. These funds were intended to help some of the most vulnerable Californians by funding the construction of emergency shelters that also provide supportive service. It is not consistent with the intent of the voters to redirect these funds to provide services to families in permanent housing. AB 221 (CARTER) Page 4 Assembly Votes: Floor: 79-0 Appr: 17-0 H&CD: 7-0 RELATED LEGISLATION AB 483 (Torres) redefines the target population that may occupy supportive housing units funded through the Supportive Housing Program. This bill is on the Senate Floor. POSITIONS: (Communicated to the Committee before noon on Wednesday, June 22, 2011) SUPPORT: California Communities United Institute California Rural Legal Assistance Foundation Housing California Western Center on Law and Poverty OPPOSED: None received.