BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 637
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: atkins
VERSION: 4/24/13
Analysis by: Mark Stivers FISCAL: no
Hearing date: June 18, 2013
SUBJECT:
Residential Development Loan Program
DESCRIPTION:
This bill allows the California Housing Finance Agency to make
Residential Development Loan Program loans available for the
development of rental housing in addition to ownership housing.
ANALYSIS:
Established in 1975, the California Housing Finance Agency
(CalHFA) is the state's affordable housing bank. Generally,
CalHFA issues tax-exempt revenue bonds and uses the proceeds to
make below market-rate loans to income-eligible first-time
homebuyers and the developers of affordable rental housing.
CalHFA's revenue bonds obligate only CalHFA itself, not the
State of California.
At times, the Legislature has required CalHFA to administer
portions of general obligation housing bonds. In 2002,
California voters approved Proposition 46 which provided $2.1
billion in general obligation bonds for various affordable
housing programs, including $130 million for CalHFA's California
Homebuyer's Downpayment Assistance Program (CHDAP). In 2006,
the voters approved Proposition 1C, which authorized an
additional $2.85 billion in general obligation bonds for
numerous affordable housing programs, including an additional
$200 million for CHDAP.
CHDAP offers to income-qualified first-time homebuyers a
deferred-payment subordinate loan (also known as a "silent
second mortgage") in the amount of three percent of the purchase
price or appraised value, whichever is less, for the buyer to
apply towards a downpayment or closing costs. Payments on this
loan are deferred, meaning that the homebuyer does not have to
make a payment on this second mortgage until the home is sold,
AB 637 (ATKINS) Page 2
refinanced, or paid in full.
AB 1512 (Garcia), Chapter 338, Statutes of 2005, allowed CalHFA,
at its discretion, to use not more than $75 million of
Proposition 46 CHDAP funds to finance the acquisition of land
and the construction and development of for-sale residential
structures through short-term loans, while requiring the
downpayment assistance remain the priority use for these funds.
Proposition 1C allowed CalHFA to use up to $100 million of the
CHDAP allocation for this same purpose. The idea was to put
CHDAP funds to short-term use until they were needed for
downpayment assistance. CalHFA marketed this program as the
Residential Development Loan Program (RDLP) and offered loans of
up to $5 million to local government agencies to assist with
site acquisition, predevelopment, and construction costs
associated with the development of affordable single family
housing projects.
As of March 31, 2013, the RDLP program had $21 million available
plus $25 million in outstanding loans currently due in the next
three years. CalFHA does not intend to transfer any additional
funds from CHDAP to the RDLP program. CalHFA has approximately
$117 million available for new CHDAP loans. In addition, the
proceeds of outstanding loans that are repaid will become
available. At this time, CDHAP is making roughly $36 million in
CHDAP loans per year, though this rate may rise as home prices
rise and the number of home sales increase.
This bill allows CalHFA to make RDLP loans available for the
development of rental housing in addition to ownership housing.
COMMENTS:
1.Purpose of the bill . According to the author, the loss of
redevelopment and diminished voter-approved housing bond funds
has significantly reduced funding available for the
development of multifamily housing affordable to low-income
families. In many cases, redevelopment funding was used to
assist in purchasing land for affordable housing development
or for other pre-development costs associated with putting a
project together. This bill authorizes CalHFA to issue
pre-development loans for multifamily residential developments
in addition to for-sale residential structures. In doing so,
this bill will help fulfill the role that redevelopment
agencies used to play in helping get affordable rental housing
projects off the ground.
AB 637 (ATKINS) Page 3
2.History of the current limitation to for-sale housing . The
author of AB 1512 limited the RDLP program to assisting
for-sale developments because the funding came from the CHDAP
program, which is a homeownership program. AB 1512 was meant
to uphold the intent of the CHDAP program to enhance
opportunities for homeownership. Other than the source of the
money, there appears to be no particular policy rationale for
limiting pre-development assistance under RDLP to ownership
developments. It is also worth pointing out that RDLP loans
are of short duration, and the funds ultimately revert to
CHDAP when needed for homebuyer assistance.
3.Chaptering conflict . Both this bill and AB 984 (Chau),
relating to CHDAP loans, amend the same section of code. The
author's will need to resolve this chaptering conflict.
Assembly Votes:
Floor: 54-22
H&CD: 5-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 12,
2013.)
SUPPORT: San Diego Housing Federation
OPPOSED: None received.