BILL ANALYSIS Ó
AB 1699
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Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1699 (Torres) - As Amended: April 17, 2012
Policy Committee: Housing and
Community Development Vote: 4-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill allows the Department of Housing and Community
Development (HCD) to establish guidelines for the refinancing or
restructuring of loans made through the Rental Housing
Construction Program, Deferred Payment Rehabilitation Loan
Program, California Housing Rehabilitation Program, and the
Family Housing Demonstration Program. Specifically, this bill:
1)Provides that HCD may extend the term of an existing rental
housing development loan, provided the development is being
operated consistent with the regulatory agreement; the
development requires an extension in order to continue to
operate; and the interest rate of the new loan is three
percent.
2)Provides that the extension of terms for an existing rental
housing development loan must be for a period of not less than
10 years, and the total term shall not exceed 55 years or not
more than 58 years if necessary to match tax restrictions.
3)Provides formulas for increasing the rents for low income
units in the various programs.
4)Allows HCD to adopt new guidelines that are exempt from the
Administrative Practice Act and Office of Administrative Law
jurisdiction. Requires the guidelines be developed through a
process that includes public input.
FISCAL EFFECT
AB 1699
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There is a potential cost from extending the terms of the
existing loans, potentially in the millions of dollars. To the
extent that there are projects that cannot pay the state back
under the current loan terms, the net cost of the bill is
reduced. Administrative costs are expected to be minor and
absorbable.
COMMENTS
1)Purpose. According to the author, AB 1699 gives HCD the
authority to extend and modernize the loans in its older
portfolio. Many of these loans were awarded in the late 1990s
and are coming close to their term. Once the loan is paid
off, the regulatory agreement that requires the units to
remain affordable is extinguished. Many affordable housing
providers would like to keep their projects affordable but
need to take on additional debt financed with a low interest
rate. By extending the loans on those projects this bill
could preserve numerous affordable housing units currently in
existence.
2)Background. From 1980 to 1995, HCD operated multiple programs
that provided low-interest loans for affordable multifamily
housing. The programs provided three percent interest rate,
deferred payment loans for rehabilitation or new construction
of housing for low-income families, single room occupancy
hotels and other special needs populations. Many of these
housing developments funded by these programs are 20 to 30
years old and are in need of capital improvements.
The terms of the loan agreements do not give HCD authority to
renegotiate the financing of these projects to allow for
additional debt to fund needed improvements to make these
projects viable in the long term. This bill gives HCD
authority to extend the terms of an existing rental housing
development loan and the period of repayment for as long as
the housing is being operated in a manner consistent with the
regulatory agreement and the development requires the
extension in order to continue to operate.
3)Previous legislation. In 2007, SB 707 (Ducheny), Chapter 658,
gave HCD authority to refinance loans made under several
programs originated in the 1970s and 1980s. HCD restructured
these older loans to conform to the Multifamily Housing
AB 1699
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program guidelines, a current HCD program. SB 707 gave
parameters for the refinance and restructuring of loans and
allowed HCD to adopt the new provisions through guidelines
rather than regulations.
4)There is no registered opposition to this bill.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081