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 








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          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 








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          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.