BILL ANALYSIS Ó Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair AB 1951 (Atkins) - Proposition 1C housing bonds. Amended: August 6, 2012 Policy Vote: T&H 6-3 Urgency: No Mandate: No Hearing Date: August 16, 2012 Consultant: Mark McKenzie SUSPENSE FILE. Bill Summary: AB 1951 would eliminate two programs included in the Affordable Housing Innovation Fund, established by Proposition 1C, and transfer $30 million in bond funds to the Multifamily Housing Program (MHP). Fiscal Impact: Diversion of $30 million in general obligation bond funds from the Affordable Housing Innovation Fund to the Housing Rehabilitation Loan Fund and continuously appropriated to HCD for expenditure under the MHP. Absent this bill, these bond funds would otherwise revert for expenditure under the CalHome Program. Background: Proposition 1C, The Housing and Emergency Shelter Trust Fund Act of 2006, includes a provision to deposit $1.5 billion in continuously appropriated general obligation bond funds into the Affordable Housing Account, of which $100 million is transferred to the Affordable Housing Innovation Fund. These funds are to be administered by the Department of Housing and Community Development (HCD) for expenditure on "competitive grants or loans to sponsoring entities that develop, own, lend, or invest in affordable housing and used to create pilot programs to demonstrate innovative, cost-saving approaches to creating or preserving affordable housing." The bond act specifies that subsequent statutory provisions establishing criteria for funding would require approval of 2/3 of the membership of each house of the Legislature. Any funds not encumbered for these purposes within 30 months of availability will revert to the Self-Help Housing Fund, and made available to HCD for purposes of enabling households to become or remain homeowners pursuant to the CalHome Program. SB 586 (Dutton), Chap 652/2007, allocated the $100 million from AB 1951 (Atkins) Page 1 the Affordable Housing Innovation Fund among the following programs: $50 million to the new Affordable Housing Revolving Development and Acquisition Program, which was split evenly between a Loan Fund and a Practitioner Fund, as specified. $5 million to the new Construction Liability Insurance Reform Pilot Program. $35 million to the existing Local Housing Trust Fund Matching Grant Program. $10 million to the Innovative Homeownership Program. Under the $25 million Practitioner Fund component of the Affordable Housing Revolving Development and Acquisition Program, HCD makes available credit lines of up to $5 million to large, established non-profits to acquire property for the development or preservation of affordable housing. Any funds non used within 36 months of availability to the practitioner would be disencumbered and transferred to the Loan Fund. Under the $5 million Construction Liability Insurance Reform Pilot Project, HCD provides grants to developers of affordable, attached for-sale housing to improve the quality of construction and reduce construction defect liability insurance premiums. Proposition 1C also transferred a total of $395 million in bond funds for use under the MHP. HCD provides loans under the program to local governments, and both non-profit and for-profit developers to fund new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households, as specified. Proposed Law: AB 1951 would repeal both the Practitioner Fund component of the Affordable Housing Revolving Development and Acquisition Program and the Construction Liability Insurance Reform Pilot Project and the associated bond fund allocations. The bill would also transfer $30 million from the Affordable Housing Innovation Fund to a subaccount in the Housing Rehabilitation Loan Fund and continuously appropriate those funds to HCD for the Multifamily Housing Program. Lastly, AB 1951 would require HCD to issue a notice of funding availability (NOFA), soliciting proposals for use of the funds. The NOFA would specify that persons with developmental disabilities, including those with autism and homeless veterans, as special needs populations for purposes of granting bonus points to AB 1951 (Atkins) Page 2 developments serving those populations. Staff Comments: To date, HCD has awarded all of the funds available for the Multifamily Housing Program and the Loan Fund component of the Affordable Housing Revolving Development and Acquisition Program. With respect to the Practitioner Fund, however, HCD developed a draft program proposal and draft guidelines in 2009 and 2010 but, after further evaluation, decided not to issue a Request for Qualifications for the program. With respect to the Construction Liability Insurance Reform Pilot Program, HCD made full amount of funds available in 2009 to developers seeking assistance through the Building Equity and Growth in Neighborhoods (BEGIN) Program, but there was no demand for the program and no awards were made. This bill is intended to repeal two unsuccessful programs established under SB 586 (Dutton), and instead use the $30 million in bond funds for an established program at HCD that currently has no funding source, but has been historically oversubscribed when funding is available. Staff notes that Proposition 1C requires the bond funds from the Affordable Housing Innovation Fund that are unencumbered within 30 months of availability will revert to the Self-Help Housing Fund, and be made available to HCD for purposes of enabling households to become or remain homeowners pursuant to the CalHome Program. AB 1951 would instead transfer unencumbered funds from the Affordable Housing Innovation Fund for use in the MHP.