BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 532
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: gordon
VERSION: 4/4/13
Analysis by: Mark Stivers FISCAL: yes
Hearing date: July 2, 2013 URGENCY: YES
SUBJECT:
Local Housing Trust Fund Matching Grant Program
DESCRIPTION:
This bill eliminates the reversion of unawarded Local Housing
Trust Fund Matching Grant Program funds to the CalHome Program,
makes the remaining funds available for either existing or new
trusts, and extends by 12 months the time current awardees have
to encumber program funds.
ANALYSIS:
In November 2006, California voters approved Proposition 1C, the
$2.85 billion Housing and Emergency Shelter Trust Fund Act of
2006. The bond act included $100 million for the Affordable
Housing Innovation Fund and required that the Legislature
program the specific uses and eligibility requirements for these
funds. SB 586 (Dutton), Chapter 652, Statutes of 2007,
allocated these funds to four separate programs, including $35
million for the Local Housing Trust Fund Matching Grant (LHTF)
program that the Department of Housing and Community Development
(HCD) administers.
Under existing law, the LHTF program matches contributions to
local housing trust funds. To be eligible for matching funds, a
local housing trust fund must receive contributions from private
or governmental sources that are not otherwise restricted for
housing programs. The awardee must also have an HCD-approved
housing element and have submitted its annual housing element
progress report, or if it is a non-profit entity, it must fund
projects located in jurisdictions with approved housing elements
and submitted progress reports. The local housing trusts may in
turn use LHTF program funds to support emergency shelters,
rental housing, and for-sale housing affordable to households
ranging from extremely low-income to moderate-income. If an
awardee fails to continue funding and operating the local
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housing trust fund for at least five years, then the trust fund
must repay HCD's award to the extent the funds have not yet been
legally encumbered to specific projects. For each rental unit
assisted, the awardee must record an affordability covenant
ensuring affordability for 55 years. For homeownership units,
the awardee must record either a resale restriction or an equity
sharing agreement against the property.
Under SB 586, half of the $35 million allocated to the LHTF
program from Proposition 1C is reserved for newly established
housing trust funds as defined by HCD. Within this set-aside
for newly established housing trust funds is an additional
36-month set-aside of an amount to be determined by HCD for
trust funds in counties with a population of less than 425,000
persons.
The LHTF grants match the local contributions on a
dollar-for-dollar basis at a minimum of $500,000 for newly
established trust funds and $1 million for existing trust funds
with a maximum grant of $2 million for either. Awardees must
encumber program funds for specific uses within 36 months of
receipt.
HCD has awarded all of the funds available for existing trusts
to nine recipients. HCD has awarded less than half of the funds
available for new housing trusts to five recipients.
Approximately $8 million remains for newly formed housing
trusts. Pursuant to SB 586, funds for newly established trusts
that HCD does not award within 42 months of availability revert
to HCD's CalHome program, which provides grants to cities,
counties, and non-profits for homeownership programs. This
reversion will occur in November 2013.
This bill eliminates the reversion of unawarded LHTF program
funds to the CalHome Program, makes the remaining funds
available in the LHTF program available for either existing or
new trusts, allows existing trusts that have already received an
award to receive a second award, extends by 12 months the time
an awardee has to encumber program funds, and makes other
changes to the LHTF program. Specifically, the bill:
Provides that funds for new trusts that HCD does not award
within 42 months of availability or that an awardee does not
encumber within 36 months of the award, and therefore must
return to HCD, shall remain in the LHTF Program and not revert
to the CalHome Program.
Eliminates the 50% set-aside for new housing trusts required
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by SB 586, the set-aside for trusts in counties with a
population of less than 425,000, and the language generally
requiring HCD to set-aside funding for new trusts from any
future appropriations.
Allows a trust that has previously received an LHTF award to
be eligible to apply for subsequent matching grants.
Requires HCD to open a new round of LHTF program applications
by June 30, 2014.
Reduces the maximum grant from $2 million to $1 million per
award cycle.
Exempts an awardee from the requirement to record a resale
restriction or equity sharing agreement on a for-sale unit if
a restriction or agreement that meets the local housing
trust's requirements has been, or will be, recorded against
the property by another public agency or nonprofit
organization.
Exempts a trust from the requirement to record a resale
restriction or equity sharing agreement on a for-sale unit if
the buyer buys the home at market value but receives
downpayment assistance from the trust.
Requires a city or county sponsoring a trust to maintain an
HCD-approved housing element during the term of the program
contract.
Allows a non-profit awardee to spend funds in a city or county
that has an HCD-approved housing element at the time the trust
commits or expends its funds, as opposed just to cities and
counties that have HCD-approved elements at the time the trust
applied to HCD.
Extends all awards under contract on January 1, 2013, by 12
months.
Eliminates the preference for existing trusts that agree to
expend more than 65% of state funds for downpayment assistance
to first-time homebuyers.
COMMENTS:
1.Purpose of the bill . According to the author, local housing
trust funds have proven to be capable of leveraging
significant private matching dollars to finance affordable
housing. Housing trusts support the construction,
acquisition, and preservation of affordable housing units for
very low-, low-, and moderate-income residents throughout
California. Each housing trust operates locally to best serve
its community's needs by supporting the housing development
process and assisting first-time homebuyers. It is not for
lack of interest that new housing trusts have not exhausted
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the funds set aside for them. The economic downturn coupled
with the demise of redevelopment has led to less housing
trusts developing than anticipated. The funds are currently
set to shift into HCD's CalHOME Program in November 2013.
This bill seeks to keep the LHTF program funds from reverting
and instead makes them available for both new and existing
trusts to apply for until expended. Successful existing
trusts should be able to access and make use of these funds to
address the high need for affordable housing development in
California.
2.The purpose of the program . State affordable housing programs
serve the same needs as local housing trusts and do so in a
competitive manner that is designed to fund the best projects.
The real purpose of the LHTF program is to grow the pie of
funding available for affordable housing by incentivizing
local governments and non-profits to commit additional funds
that are not otherwise restricted for housing programs. When
the Legislature created the LHTF program it admittedly
allocated half of the funds to existing trusts, in some cases
rewarding those trusts for past commitments rather than
incentivizing new commitments, but the real growth in funding
comes from encouraging the creation of new housing trusts with
new local revenues. This bill undermines that key objective
by eliminating the dedicated funding for new housing trusts
and allowing existing trusts, including those that have
already received an award, to apply for the funds. While new
trusts technically would still be eligible to compete under
the bill, it is very unlikely that there would be any funding
left for them. New trusts apply in a non-competitive process
when they are ready. Existing trusts compete in a competitive
process at one point in time. So unless a new trust is ready
to apply in the very near future, it will not be able to
compete in the one open round the bill requires. The
committee may wish to consider whether eliminating the
dedicated funds for new trusts fulfills the purpose of the
LHTF program. The committee may wish instead to extend the
availability of the funding for new trusts to June 30, 2016,
and maintain the $2 million maximum grant.
3.Performance to date . The LHTF awardees face varying deadlines
to draw down program funds for specific project expenditures,
depending on when they entered into their contract. The
deadlines for the earliest awardees begin to hit in November
and December of this year. In asking for a 12-month extension
for all current awardees, this bill acknowledges that many of
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the awardees have significant program funding left. Six of
the nine existing trust fund awardees and all five of the new
trusts (which started later) have unspent funds, totaling
$14.5 million of the $24 million HCD awarded. Given the
economic downturn and the demise of redevelopment, which
required finding new funding sources for pipeline projects, an
extension may well be warranted. On the other hand, it is
pointless to give an extension if awardees have poor prospects
for encumbering the funds in the additional 12 months, and it
is not clear if the current awardees have immediate funding
prospects or not. The committee may wish to subject the
extension to performance benchmarks to be established by HCD.
In addition, the fact that current awardees have such
significant balances remaining seems to undermine the author's
interest in allowing current awardees to receive a second
award.
4.Affordability covenants . This bill exempts LHTF awardees from
the requirement to record a resale restriction or equity
sharing agreement on a for-sale unit in certain circumstances.
In the first instance, the trust would be exempt if another
public agency or non-profit organization recorded a document
on the property that "meets the local housing trust's
requirements." The reference to non-profit organizations is
problematic in that there is no guarantee that the non-profit
will continue to exist or be accountable to the public. Also,
it is not clear that the reference to the document meeting the
trust's requirements means the requirements of the LHTF
program or some other. In the second instance, the trust is
exempt if the buyer only receives downpayment assistance from
the trust. This is exactly the situation that the equity
sharing agreement option is meant to address. The homeowner
may sell the home to any person at market price, but shares
the profit with the trust in the same proportion that the
downpayment assistance contributed to the original purchase of
the home. The committee may wish to replace these exemptions
with one that exempts LHTF awardees from recording such
documents for a for-sale or rental property if another public
entity has recorded a document that meets LHTF program
requirements.
5.Technical amendments .
On page 6, lines 30-33 strike "The city, county, or city
and county shall maintain current substantial compliance of
its housing element in order to maintain eligibility for
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funding pursuant to this section."
On page 7, after line 13 insert "(3) A city, county, or
city and county that has received an award pursuant to this
section shall not encumber any program funds unless it has
an adopted housing element the department has determined,
pursuant to Section 65585 of the Government Code, is in
substantial compliance with the requirements of Article
10.6 (commencing with Section 65580) of Chapter 3 of
Division 1 of Title 7 of the Government Code."
1.Urgency statute . This bill contains an urgency clause in
order to give the earliest LHTF awardees an extension before
their draw down deadlines expire later this year and to
prevent the reversion of unawarded LHTF program funds to the
CalHome Program in November of this year.
Assembly Votes:
Floor: 77-1
Appr: 17-0
H&CD: 7-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 26,
2013.)
SUPPORT: California Building Industry Association
California Housing Consortium
California Housing Partnership Corporation
California Rural Legal Assistance Foundation
Center for Community Change
EAH Housing
Habitat for Humanity San Luis Obispo County
HEART of San Mateo County
HIP Housing
Housing California
Housing Leadership Council of San Mateo County
Housing Trust Fund of Santa Barbara County
Housing Trust of Santa Clara County
Housing Trust of Silicon Valley
Marin Workforce Housing Trust
MidPen Housing
Non-Profit Housing Association of Northern
California
North Valley Housing Trust
Orange County Housing Trust
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Sacramento Housing Alliance
San Diego Housing Commission
San Diego Housing Federation
San Luis Obispo County Housing Trust Fund
Santa Clara County Association of Realtors
Silicon Valley Leadership Group
Ventura County Housing Trust Fund
Western Center on Law and Poverty
OPPOSED: None received.