BILL ANALYSIS                                                                                                                                                                                                    






           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.




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           $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 




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            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.
          




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          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.