BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2447
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: skinner
VERSION: 6/26/12
Analysis by: Mark Stivers FISCAL: yes
Hearing date: July 3, 2012
SUBJECT:
California Neighborhood Revitalization Partnership Act of 2012
DESCRIPTION:
This bill transfers $25 million of Proposition 1C funds from the
California Homebuyer Downpayment Assistance Program to a new
California Neighborhood Revitalization Partnership Program.
ANALYSIS:
In November 2002, California voters approved Proposition 46, the
$2.1 billion Housing and Emergency Shelter Trust Fund Act of
2002. In November 2006, California voters approved Proposition
1C, the $2.85 billion Housing and Emergency Shelter Trust Fund
Act of 2006. Together, these bonds included $250 million for
the California Homebuyer Downpayment Assistance Program (CHDAP),
which the California Housing Finance Agency (CalHFA)
administers.
CHDAP provides low- and moderate-income, first-time homebuyers
with a deferred-payment junior loan (i.e., "silent second"
mortgage) of up to three percent of a home's value to assist the
buyer with downpayment and closing costs. CalHFA estimates that
it will have $107 million in CHDAP funds ($29 million from
Proposition 46 and $78 million from Proposition 1C) remaining as
of July 1, 2012.
This bill transfers $25 million of Proposition 1C funds from
CHDAP to a new California Neighborhood Revitalization
Partnership Program (CNRPP). Specifically, the bill:
Requires CalHFA, on a competitive basis, to make grants and
loans available under the CNRPP to local governments and
non-profit organizations for the following purposes:
Establishing financing mechanisms for the purchase and
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rehabilitation of foreclosed homes and foreclosed
residential properties.
Purchasing abandoned and foreclosed homes and
residential properties.
Demolishing blighted structures that are foreclosed or
abandoned.
Redeveloping demolished or vacant properties.
Requires CalHFA, after at least one public hearing, to adopt
CNRPP guidelines by March 14, 2013. The guidelines are exempt
from the Administrative Procedures Act and must include:
A requirement that program funds leverage funds from
other sources with the percentage to be determined by
CalHFA.
A requirement that funded rental units be subject to
affordability covenants of at least 15 years and that
funded homeownership units be subject to an equity sharing
agreement as defined in existing density bonus law.
Requires CalHFA to do all of the following with respect to the
CNRPP:
Facilitate the interaction and negotiation between
financial institutions, private investors, local
governments, and non-profits in the identification and
acquisition of foreclosed properties for resale, rental, or
lease-to-own to low- and moderate-income families.
Develop strategies with the California Energy Commission
and the Public Utilities Commission to leverage investments
in the rehabilitation of foreclosed properties to improve
energy efficiency.
Maximize job and apprenticeship opportunities by
coordinating multiple program investments.
Limits CalHFA's and grantees' combined administrative costs
under the CNRPP to five percent of expenditures.
COMMENTS:
1.Purpose of the bill . According to the author, providing
assistance to local governments and non-profit organizations
to compete against private investors to purchase homes and in
turn make them available to low- and moderate-income families
helps create affordable housing opportunities. While there
may be multiple bids on foreclosed properties in certain areas
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of the state, this competition puts low- and moderate-income
families at a competitive disadvantage to purchase the homes.
This bill creates the CNRPP program to help local governments
and non-profits capture foreclosed properties and offer them
for resale, rental, or lease-to-own arrangements. The program
also creates the opportunity to leverage investments in the
rehabilitation of foreclosed homes to improve energy
efficiency.
2.Competing with the private market . As a general rule, the
state's affordable housing programs seek to fill housing needs
that the private market does not meet. For example, the state
finances rental housing only when the owner commits to renting
units at below-market rents, and the state provides
downpayment assistance to a homebuyer only when the household
cannot obtain sufficient private financing to purchase a home.
This bill, on the other hand, finances local governments and
non-profits to enter a market, the purchase and rehabilitation
of foreclosed homes, that is currently booming in many parts
of the state. News articles report multiple offers, many from
private investors, for foreclosed homes. Data from the
California Association of Realtors (CAR) shows that more than
85% of foreclosed homes sell within 90 days within the 20
counties for which it has data (which seem fairly
representative of all counties in the state), and many of the
homes that do not sell within 90 days may sell thereafter. As
the chief economist for CAR stated in this committee's
informational hearing on March 7, 2012, investors clear
markets, and the problem in California is the lack of
inventory of foreclosed homes rather than the abundance of
unsold homes. By funding local governments and non-profits to
enter this market, this bill only increases demand for these
homes, and it is unlikely that local governments and
non-profits will be able to beat investors in a bidding war.
The author argues that the homes rehabilitated through this
program will create affordable housing opportunities. While
the bill does require grantees that lease homes to make the
rents affordable, the bill does not require grantees that
resell homes, the most likely outcome, to do so at an
affordable price. Moreover, there are other means to create
homeownership opportunities, namely the downpayment assistance
program from which this bill redirects funding, that are more
efficient and give consumers greater choice of homes to
purchase. The committee may wish to consider whether scarce
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Proposition 1C bond funds should help local governments and
non-profits compete with the private sector in a
well-functioning market. The committee may also wish to
consider whether downpayment assistance is a more efficient
and effective way to create homeownership opportunities for
low- and moderate-income families.
3.The unmet market niche . There is a segment of the foreclosed
home market, however, that the private sector is not
embracing, namely those homes that cost more to repair than
they are worth. As they remain unsold, these homes are likely
to become eyesores on the community, create opportunities for
illegal behavior, and negatively impact surrounding property
values. In addition, there are probably some areas of the
state where the supply of foreclosed homes significantly
exceeds demand, leading to large numbers of unsold homes. For
example, the CAR data mentioned above indicates that 31.4% of
foreclosed homes in Siskiyou take longer than 90 days to sell,
more than twice the statewide median. Because the private
market passes over these individual homes and communities, it
may be appropriate to utilize public funds to address these
narrow market failures to address blight. The committee may
wish to consider narrowing the bill to support the purchase
and rehabilitation of foreclosed homes that have been on the
market for more than 90 days.
4.Expediting program delivery and reducing agency overlap . The
Department of Housing and Community Development's (HCD)
CalHome Program provides grants and loans to local governments
and non-profits for a variety of activities that support
homeownership for lower-income households. With a few
exceptions that could be accommodated in this bill, the CNRPP
fits well into the CalHome framework. Utilizing the existing
CalHome Program could speed up fund delivery by eliminating
much of the set up time required for a brand new program.
Applicants would also be more familiar with the procedures and
rules.
In addition, as the governor seeks to streamline state
agencies, including CalHFA and HCD, with his reorganization
plan, utilizing an existing program would reduce agency and
program overlap. It is unclear why two grant programs are
needed when one will suffice. Moreover, HCD has administered
extremely similar grant programs for local governments and
non-profits through the CalHome and the federally-funded
Neighborhood Stabilization Program, on which this bill is
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loosely based. While CalHFA administered a Housing Enabled by
Local Partnerships (HELP) Program to provide loans to local
governments to address a variety of unmet affordable housing
needs and more recently has made grants to non-profit housing
counseling agencies with federal funds, it generally acts more
as a bank than a grant-making state agency. The committee may
wish to consider running CNRPP through HCD's CalHome Program
with special provisions to reflect the author's desired
program components, including requiring leveraged
applications, allowing grantees to sell homes to
moderate-income buyers, and allowing the lease and
lease-to-own of properties.
5.Technical amendments :
On page 3, line 7 strike "Act of 2012" and insert
"Program"
On page 5, lines 3-4 strike "blighted structures that
are foreclosed or abandoned, or redevelop demolished or
vacant properties" and insert "abandoned or foreclosed
residential properties that are blighted"
Strike lines 22-39 on page 5, strike lines 1-2 on page
6, and insert "is consistent with the provisions of
paragraph (2) of subdivision (c) of Section 65915 of the
Government Code."
Assembly Votes:
Floor: 50-26
Appr: 12-5
H&CD: 5-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 27,
2012)
SUPPORT: California Independent Bankers
California State Association of Counties
Century Housing
Community Housing Development Corporation
Housing and Economic Rights Advocates
Housing California
Non-Profit Housing Association of Northern
California
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12 individuals
OPPOSED: None received.