BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                        AB 532|
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                                    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  
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          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  

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          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  

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            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

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          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


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          JA:AL:nl  9/6/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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