BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 532| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 532 Author: Gordon (D), et al. Amended: 9/5/13 in Senate Vote: 27 - Urgency SENATE TRANSPORTATION & HOUSING COMMITTEE : 11-0, 7/2/13 AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso, Lara, Liu, Pavley, Roth, Wyland SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13 AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg ASSEMBLY FLOOR : 77-1, 5/28/13 - See last page for vote SUBJECT : Local Housing Trust Fund SOURCE : Author DIGEST : This bill deletes provisions requiring the reversion of funds in the Local Housing Trust Fund Matching Grant Program to the Self-Help Housing Fund for expenditure in the CalHome Program. This bill also makes specified changes to the Local Housing Trust Fund (LHTF) Program, specifies that funds would be continuously available for encumbrance and disbursement to housing trust funds, and requires the Department of Housing and Community Development (HCD) to issue a Notice of Funding Availability (NOFA) for new trusts, as defined, by June 30, 2014. Senate Floor Amendments of 9/5/13 clarify that a trust that has CONTINUED AB 532 Page 2 previously received a grant through the LHTF Program may not receive an allocation in excess of $1 million per NOFA. 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 LHTF program that 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 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 CONTINUED AB 532 Page 3 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 funds to the Self-Help Housing Fund, and instead requires any funds set aside for the LHTF Program pursuant to SB 586 to be continuously available for encumbrance and disbursement to trust funds. This bill also: 1.Requires HCD to issue a NOFA by June 30, 2014, pursuant to emergency guidelines, for new trusts, defined to include existing trusts that matching funds from a new source identified or created on or after June 30, 2012, and specifies that a trust that has previously received a grant through the LHTF Program may not receive an allocation in excess of $1 million per NOFA. 2.Specifies that a housing trust fund is not required to record a specified deed restriction for a project it finances if such a restriction has been recorded against the property by another agency. 3.Requires the extension of any award to a housing trust that was under contract on January 1, 2013 by one year, subject to progress benchmarks established by HCD. 4.Eliminates the preference for existing trust funds that agree to spend 65% of state funds for downpayment assistance to first-time homebuyers. 5.Eliminates the set-aside for newly established trusts in counties with a population of less than 425,000 persons, and the general requirement that HCD set aside funding for new CONTINUED AB 532 Page 4 trusts from future appropriations. 6.Prohibits a city or county that received an award from encumbering the funds unless it has adopted an HCD-approved housing element. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Diversion of approximately $8.1 million in general obligation bond funds from the Self-Help Housing Fund to the Affordable Housing Innovation Fund. Absent the bill, these funds would be available for expenditure on the CalHome Program. Minor HCD administrative costs, likely less than $50,000, to develop emergency guidelines, issue a NOFA by June 30, 2014, and allocate remaining funds in future years (Affordable Housing Innovation Fund). SUPPORT : (Verified 8/31/13) California Building Industry Association California Housing Consortium California Housing Partnership Corporation California Rural Legal Assistance Foundation Center for Community Change City of Goleta City of San Luis Obispo 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 Silicon Valley League of California Cities Marin Workforce Housing Trust MidPen Housing Non-Profit Housing Association of Northern California North Valley Housing Trust Orange County Housing Trust CONTINUED AB 532 Page 5 Sacramento Housing Alliance 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 on Poverty ARGUMENTS IN SUPPORT : 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 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. ASSEMBLY FLOOR : 77-1, 5/28/13 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NOES: Donnelly NO VOTE RECORDED: Holden, Vacancy CONTINUED AB 532 Page 6 JA:AL:nl 9/6/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED