BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 2447 (Skinner) - California Neighborhood Revitalization
Partnership Act of 2012.
Amended: August 6, 2012 Policy Vote: T&H 6-2
Urgency: No Mandate: No
Hearing Date: August 6, 2012
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 2447 would establish the California
Neighborhood Revitalization Partnership Program and transfer $25
million in bond funds from the California Homebuyer Downpayment
Assistant Program to the new program.
Fiscal Impact:
Diversion of $25 million in general obligation bond funds
from the Self-Help Housing Fund for expenditure by the
Department of Housing and Community Development (HCD) for
the program established by this bill.
HCD administrative costs of up to $150,000 to adopt program
regulations, and a total of up to $2 million in
administrative costs over the life of the program
(Proposition 1C bond funds).
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 $200 million
is transferred to the Self-Help Housing Fund. These funds are
made available to the California Housing Finance Agency (CalHFA)
for expenditure in the California Homebuyer's Downpayment
Assistance Program (CHDAP). The purpose of this program is to
provide downpayment assistance to first-time low- and
moderate-income homebuyers. CalHFA provides deferred-payment,
low-interest loans, generally up to 3% of the home sale price,
to reduce principal and interest payments and make financing
more affordable.
CalHFA estimates that it currently has about $107 million in
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bond funds ($78 million of which is from Proposition 1C)
remaining. Approximately 275 loans are provided through CHDAP
each month, with an average loan amount of $7,000. At the
current rate of assistance provided through the program, all
remaining funds could be expended within four to five years.
The federal Housing and Economic Recovery Act of 2008 created
the Neighborhood Stabilization Program, which provided funds to
state and local governments to purchase abandoned and foreclosed
properties that might otherwise become a source of blight.
These grant funds allow for the purchase, rehabilitate,
redevelop, and resell foreclosed or abandoned homes in order to
stabilize neighborhoods and stem the decline in value of
neighboring properties. Homes that are purchased with these
federal funds must be sold or rented to low- or moderate-income
families. To date, there have been three rounds of funding and
California has received a total of approximately $1.1 billion.
Proposed Law: AB 2447 would establish the California
Revitalization Partnership Act of 2012 and transfer $25 million
in Proposition 1C bonds from the Self-Help Housing Fund for
expenditure on the new program. HCD would make the funds
available to local public agencies or nonprofit corporations as
grants or loans for the purchase, rehabilitation, or demolition
of foreclosed or abandoned residential properties and for
downpayment assistance associated with the resale of an improved
property.
The bill would require applicants for funding to demonstrate
that those funds will be used to leverage other funds. Those
who receive a grant or loan and purchase or improve an abandoned
or foreclosed property would be required to sell or lease the
property to low- or moderate-income households, as specified.
An unspecified percentage of properties sold must be at an
affordable housing cost to lower-income households, and
properties that are leased must be at an affordable rent and
subject to a 15-year affordability covenant. The bill would
also place specified duties on HCD in the administration of the
program.
Staff Comments: This bill is intended to provide funding for a
new state-funded program that would allow local governments and
nonprofit entities to compete against private investors for
purchasing foreclosed and abandoned properties and allow them to
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make the properties available as affordable housing. The
program has similar parameters to the federal Neighborhood
Stabilization Program.
HCD indicates that the current federal program involves a
cost-sharing arrangement with local agencies, whereby a portion
of the federal funding provided to states is provided to locals
to cover their administrative costs. While not explicit in the
bill, it is likely that this arrangement would also apply to the
program established by this bill, and as a result, HCD's
administrative costs would likely exceed the normal allowable
amount of 5 percent for bond-funded programs. Initially, HCD
would likely incur one-time costs of up to $150,000 to adopt
regulations for the program. The available funding would
probably be distributed in one round of funding, but there would
be some ongoing monitoring costs to ensure that properties that
are resold or leased maintain affordability standards. Total
administrative costs over the limited life of the program could
be in the range of $2 million, including local cost-sharing,
most of which would be incurred on the front end.
Proposition 1C provided $200 million in general obligation bond
funds for the California Downpayment Assistance Program, of
which approximately $78 million remains. This bill would divert
approximately 1/3 of the remaining funds for a new purpose. It
is unclear whether the new purpose specified in the bill is
consistent with the scope and effect of Proposition 1 C, as
approved by voters.
The legislative findings and declarations specify that "it is
incumbent upon the Legislature to evaluate and make changes,
where necessary, in underperforming housing bond programs."
However, there is no evidence to indicate that the CDAP has
underperformed in any way, and CalHFA reports a steady stream of
applications for the funding. The Committee may wish to
consider whether the approach of the California Neighborhood
Revitalization Partnership Program is a higher and better use of
general obligation bond funds than the existing CDAP, especially
considering the challenges associated with establishing a new
program with high administrative costs that would only have a
single year of funding.
Recommended Amendments: Staff notes that, with respect to
property purchased and improved by an awardee, the percentage of
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properties that an awardee must sell at an affordable housing
cost to lower-income households is currently unspecified. Staff
recommends that the bill be amended to fill in the blank.