BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: sb 1220
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  desaulnier
                                                         VERSION: 4/16/12
          Analysis by:  Mark Stivers                     FISCAL:  yes
          Hearing date:  April 24, 2012



          SUBJECT:

          Housing Opportunity and Market Stabilization (HOMeS) Trust Fund

          DESCRIPTION:

          This bill imposes a fee of $75 on the recording of each 
          real-estate related document, except for those documents 
          recorded in connection with a transfer subject to a documentary 
          transfer tax, and directs the money to the Housing Opportunity 
          and Market Stabilization (HOMeS) Trust Fund.  The Legislature 
          may then appropriate these funds for the development, 
          acquisition, rehabilitation, and preservation of homes 
          affordable to low- and moderate-income households, including 
          emergency shelters, transitional and permanent rental housing, 
          foreclosure mitigation, and homeownership opportunities.  

          ANALYSIS:

          Current law establishes a number of programs at the Department 
          of Housing and Community Development (HCD) and the California 
          Housing Finance Agency (CalHFA) to make housing more affordable 
          to California families and individuals, including the following 
          mainline programs:

           Multifamily Housing Program, which funds the new construction, 
            rehabilitation, and preservation of permanent and transitional 
            rental homes for lower income households through loans to 
            local governments, non-profit developers, and for-profit 
            developers.

           Joe Serna, Jr. Farmworker Housing Program, which funds the 
            development of ownership or rental homes for agricultural 
            workers through grants to local governments and non-profit 
            organizations.

           Emergency Housing Assistance Program, which funds emergency 
            shelters and transitional homes for homeless individuals and 




          SB 1220 (DESAULNIER)                                   Page 2

                                                                       


            families through grants to counties and non-profit entities 
            for rehabilitation, renovation, expansion, site acquisition, 
            and equipment.

           CalHome Program, which funds downpayment assistance, home 
            rehabilitation, counseling, self-help mortgage assistance 
            programs, and technical assistance for self-help and shared 
            housing through grants and loans.

           California Homebuyer Downpayment Assistance Program, which 
            aids first-time homebuyers with down payment and/or closing 
            costs.

          Historically, the state has funded these programs through the 
          sale of general obligations bonds.  Most recently, the voters 
          approved a $2.1 billion bond through Proposition 46 in 2002 and 
          then $2.85 billion through Proposition 1C in 2006.  HCD has 
          awarded almost all of the funds made available under these 
          propositions, particularly in these mainline programs.  

          Until 2011, the Community Redevelopment Law required 
          redevelopment agencies to set aside 20% of all tax increment 
          revenue to increase, improve, and preserve the community's 
          supply of low and moderate income housing available at an 
          affordable housing cost.  In fiscal year 2009/10, redevelopment 
          agencies deposited $1.075 billion of property tax increment 
          revenues into their Low and Moderate-Income Housing Funds.  With 
          the elimination of redevelopment agencies, this source of 
          funding for affordable housing is no longer available.

           This bill  imposes a fee of $75 on the recording of each 
          real-estate related document, except for those documents 
          recorded in connection with a transfer subject to a documentary 
          transfer tax, and directs the money to the HOMeS Trust Fund.  
          The Legislature may then appropriate these funds for the 
          development, acquisition, rehabilitation, and preservation of 
          homes affordable to low- and moderate-income households, 
          including emergency shelters, transitional and permanent rental 
          housing, foreclosure mitigation, and homeownership 
          opportunities.  The bill further requires HCD to report annually 
          on the expenditure of these funds and requires the Bureau of 
          State Audits to conduct periodic audits to ensure that 
          departments award appropriated funds in a timely fashion and 
          consistent with legal requirements.
          
          COMMENTS:




          SB 1220 (DESAULNIER)                                   Page 3

                                                                       



           1.Purpose of the bill  .  According to the author, having a 
            healthy housing market that provides an adequate supply of 
            homes affordable to families and individuals at all income 
            levels is critical to the economic prosperity and quality of 
            life in California.  The decline in housing production has 
            played a significant role in creating and prolonging the Great 
            Recession.  The lack of sufficient, affordable homes near jobs 
            impedes economic growth and development by making it difficult 
            for California employers to attract and retain employees.  
            Moreover, continued affordability gaps mean that California 
            has the second lowest homeownership rate in the nation, that 
            minimum wage earners have to work 120 hours per week to afford 
            the average two bedroom rental apartment, and that California 
            has the largest population of homeless persons in the nation.  


            The exhaustion of bond funds and the elimination of 
            redevelopment agencies means that millions of Californians 
            affected by the state's chronic housing shortage, including 
            seniors, veterans, people experiencing chronic homelessness, 
            working families, people with mental, physical, or 
            developmental disabilities, agricultural workers, people 
            exiting jails, prisons, and other state institutions, 
            survivors of domestic violence, and former foster and 
            transition-aged youth, will remain unhoused or living in 
            substandard and unaffordable conditions. 

            California desperately needs a permanent, ongoing source or 
            sources of funding dedicated to affordable housing 
            development.  Such investment will create consistency and 
            predictability in the affordable housing market, leverage 
            billions of dollars in private investment, lessen demands on 
            law enforcement and dwindling health care resources as fewer 
            people are forced to live on the streets or in dangerous 
            substandard buildings, and increase businesses' ability to 
            attract and retain skilled workers.  In addition, a dedicated 
            revenue source will allow a "pay as you go" approach, as 
            opposed to issuing bonds that require additional interest 
            costs. 

           2.Exempts documents related to sale transactions  .  In order to 
            promote homeownership opportunities, this bill exempts 
            documents made in connection with the sale of real property 
            from the new fee.  This will ensure that transaction costs do 
            not increase for homebuyers.




          SB 1220 (DESAULNIER)                                   Page 4

                                                                       


           
          3.Revenue projections  .  Based on recording data from a variety 
            of past years, it is estimated that this bill will generate an 
            average of $525 million per year for the HOMeS Trust Fund, 
            ranging from $300 million per year in low-volume years to $750 
            million per year in high-volume years.

           4.Allocation to be determined  .  This bill requires that monies 
            in the HOMeS Trust Fund go for the development, acquisition, 
            rehabilitation, and preservation of homes affordable to low- 
            and moderate-income households, including emergency shelters, 
            transitional and permanent rental housing, foreclosure 
            mitigation, and homeownership opportunities.  Aside from these 
            general parameters, however, this bill does not allocate funds 
            to particular programs or uses.  Instead, it leaves the 
            decision on allocation to the Legislature each year as part of 
            the budget process.  This provides less certainty but ensures 
            that funds can address priority housing needs as they change 
            through the years.  Nonetheless, it is the author's intent 
            that these monies fund a variety of housing needs, ranging 
            from homeless shelters to rental housing to homeownership, 
            and, where possible, use established and well-understood 
            programs.  In addition to funding statewide programs, the 
            Legislature could also designate a portion of the funds as 
            block grants for cities and counties that meet certain 
            thresholds.  

           5.Types of documents covered  .  This bill applies the $75 fee to 
            the recording of all real estate-related documents except 
            those recorded in connection with a transfer subject to the 
            imposition of a documentary transfer tax and those expressly 
            exempted from payment of recording fees.  There are many types 
            of documents that fall under the proposed fee, including, but 
            not limited to: 

                 Deeds 
                 Grant deeds
                 Trustee's deeds
                 Deeds of trust
                 Reconveyances
                 Quit claim deeds
                 Fictitious deeds of trust
                 Assignments of deeds of trust
                 Requests for notice of default
                 Abstracts of judgment
                 Subordination agreements




          SB 1220 (DESAULNIER)                                   Page 5

                                                                       


                 Declarations of homestead
                 Abandonments of homestead
                 Notices of default 
                 Releases or discharges
                 Easements
                 Notices of trustee sale
                 Notices of completion
                 Mechanic's liens
                 Maps
                 Covenants, conditions, and restrictions

           1.Two-thirds vote required  .  Legislative Counsel has determined 
            that this bill would result in a change in state taxes for the 
            purpose of increasing state revenues within the meaning of 
            Section 3 of Article XIIIA of the California Constitution and 
            thus requires a 2/3 vote for passage.

           2.Arguments in opposition  .  The California Taxpayers Association 
            argues that the fee is unreasonable and that funding for 
            low-income housing should not be placed on the backs of people 
            trying to record documents.   The Howard Jarvis Taxpayers 
            Association believes that this is the wrong time to increase 
            taxes against struggling California families already suffering 
            through the highest foreclosure rates in 70 years.  It cites 
            research ranking California as 14th among the states in 
            combined state and local per capita property taxes and 
            believes that existing taxes on property are already 
            excessive.  The County Recorders Association of California 
            writes that the new fee places additional financial burdens at 
            the expense of ordinary Californians and will result in 
            significant increases in staff time to collect fees and 
            address unsatisfied customers. 

            The committee also received 73 letters of opposition from 
            local realtor boards based on the introduced version of the 
            bill.  With the recent amendments to the bill that won the 
            support of the California Association of Realtors, it is 
            assumed that these letters are no longer current.

           3.Double referral .  The Rules Committee has referred this bill 
            to both this committee and the Governance and Finance 
            Committee.  Because the Governance and Finance Committee is 
            scheduled to hear this bill on April 25, the author should 
            take any amendments agreed to in this committee in the 
            Governance and Finance Committee.
          




          SB 1220 (DESAULNIER)                                   Page 6

                                                                       


          POSITIONS:  (Communicated to the committee before noon on 
          Wednesday,                                             April 18, 
          2012)

          SUPPORT:  


          California Housing Consortium (sponsor)
          Housing California (sponsor)
          AARP
          A&B Painting
          Affirmed Housing Group
          Affordable Housing Associates
          Aging Services of California
          Alameda County Developmental Disability  
               Council
          Alliance for Regional Solutions
          Alpha Construction Company
          AMCAL Multi-Housing
          Anderson and Associates
          Asian Pacific Environmental Network
          BAR Architects
          BAYC
          Berkeley Food and Housing Project
          Bernal Heights Neighborhood Center
          Bonita House
          Brayer Electric Company
          BRC Advisors
          Building Futures with Women and Children
          Burbank Housing Corporation
          Burbank Housing Development Corporation
          Business Leaders Task Force
          Cabrillo Economic Development Corporation
          Cahill Contractors
          California Association of Housing Authorities
          California Association of Local Housing Finance Agencies
          California Association of Realtors
          California Building Industry Association
          California Coalition for Rural Housing
          California Coalition for Youth
          California Housing Partnership Corporation
          California Infill Builders Association
          California Labor Federation
          California Rural Legal Assistance Foundation
          Calistoga Affordable Housing
          Caritas Management Corporation




          SB 1220 (DESAULNIER)                                   Page 7

                                                                       


          Center for Sustainable Neighborhoods
          Center on Policy Initiatives
          Central Coast Residential Builders
          Century Housing
          Charities Housing
          Christian Church Homes
          City of Dublin
          City of Oakland
          City of San Leandro
          City Heights Community Development Corporation
          Clifford Beers Housing
          CLUE-LA
          Collaborative Project Consulting
          Community Action to Fight Asthma
          Community Economics
          Community Corporation of Santa Monica
          Community Housing Opportunities Corporation
          Community Housing Partnership
          Community Housing Works
          Community Interfaith Services
          Community of Friends
          Core Companies
          Corporation for Supportive Housing
          Dahlin Group Architecture Planning
          EAH Housing
          East Bay Asian Local Development Corporation
          East Bay Housing Organizations
          Eden Housing
          Enterprise Community Partners
          Equity Community Builders
          Eugene Burger Management Corporation
          EveryOne Home
          First United Methodist Church of Los Angeles
          Fred Finch Youth Center
          Goldfarb Lipman Attorneys
          Greenbelt Alliance
          Habitat for Humanity California
          Habitat for Humanity East Bay
          Habitat for Humanity Greater Los Angeles
          Habitat for Humanity Greater San Francisco
          Hearth Homes
          Heffernan Insurance Brokers
          Housing Advisory Group
          Housing Consortium of the East Bay
          Housing Leadership Council of San Mateo County
          Housing Trust of Santa Clara County




          SB 1220 (DESAULNIER)                                   Page 8

                                                                       


          ICON Builders
          Interfaith Committee for Worker Justice of San Diego County
          Islamic Shura Council of Southern California
          Jacobs Center for Neighborhood Innovation
          Jamboree Housing Corporation
          John Burton Foundation for Children Without Homes
          Koning Eizenberg Architecture
          Larkin Street Youth Services
          Law Foundation of Silicon Valley
          League of Women Voters of California
          League of Women Voters of Marin County
          Leddy Maytum Stacy Architects
          LifeLong Medical Care
          LifeSTEPS
          LISC Bay Area
          Los Angeles Business Council
          L.A Family Housing
          Many Mansions
          Marin Environmental Housing Collaborative
          Marin Partnership to End Homelessness
          Mental Health America of Los Angeles
          Mercy Housing
          MidPen Housing
          Mikiten Architecture
          Mill Valley Affordable Housing Committee
          Morley Builders
          Move LA
          Napa Valley Community Housing
          National Equity Fund
          Natural Resources Defense Council
          Neighborhood Housing Services Silicon Valley
          New Directions
          Non-Profit Housing Association of Northern California
          North County Lifeline
          Opportunity Fund Northern California
          Orange County Business Council
          Palm Communities
          Project Sentinel
          Pyatok Architects
          Public Advocates
          DRA Infill Coalition
          Regional Asthma Management and Prevention
          Related California
          Resources for Community Development
          Rural Community Assistance Corporation
          Sacramento Housing Alliance




          SB 1220 (DESAULNIER)                                   Page 9

                                                                       


          Sacramento Yolo Mutual Housing Association
          St. Anne's
          St. Anthony Foundation
          St. Ignatius Parish, San Francisco
          San Diego Building Trades Council Family Housing Corporation
          San Diego Housing Federation 
          San Diego LGBT Community Center
          San Gabriel Valley Housing and Homeless Coordinating Council
          San Luis Obispo County Housing Trust Fund
          Satellite Housing
          Self-Help Enterprises
          Shelter, Inc.
          Sierra Business Council
          Silicon Valley Leadership Group
          South County Housing
          Southern California Association of Non-Profit Housing
          Stand Up for Neighborly Novato
          State Building and Construction Trades Council of California
          Stocktonians Taking Action to Neutralize Drugs
          Sun Country Builders
          Sunseri Construction
          Treasure Island Homeless Development Initiative
          United Homeless Healthcare Partners
          USA Properties
          Veterans Association of North County
          Walton Construction Services
          West Bay Housing Corporation
          Western Center on Law and Poverty
          Westport Construction
          Yolo Community Care Continuum

          
          OPPOSED:   

          California Bankers Association
          California Land Title Association
          California Mortgage Bankers Association
          California Taxpayers Association
          County Recorders Association of California
          Howard Jarvis Taxpayers Association