BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Ben Hueso, Chair
BILL NO: AB 639 HEARING DATE: 7/9/13
AUTHOR: Pérez
VERSION: 7/03/13
FISCAL: Yes
VOTE: Two-thirds (Urgency)
SUBJECT
Veterans Housing and Homeless Prevention Act of 2014.
DESCRIPTION
Summary :
Authorizes the issuance of $600 million in general obligation
(GO) bonds for the acquisition, construction, rehabilitation,
and preservation of affordable multifamily supportive housing,
affordable multifamily transitional housing, or related
facilities and services for veterans and their families - if
approved by the voters at the November, 2014, general election.
Note: These funds are taken from the approximately $1.1 billion
in remaining bond authority under the Home Loan Program managed
by the Department of Veterans Affairs (CalVet).
Existing law:
1.Provides for farm and home purchase benefits for qualifying
veterans under the Veterans Farm and Home Purchase Act of 1974
and subsequent acts, which are collectively referred to as the
CalVet Home Loan Program (Military & Veterans Code Section
987.50, et seq.).
2.Defines "home" as a parcel of real estate upon which there is
a dwelling house or other buildings that will, in the opinion
of CalVet, suit the needs of the purchaser and the purchaser's
dependents as a place of abode; a condominium; a mobilehome;
and cooperative housing (MilVets §987.51).
3.Authorizes the Veterans Bond Act of 2008 for the purpose of
creating a fund to provide farm and home aid for veterans in
the amount of $900 million (MilVets §998.400, et seq.).
4.Authorizes the Veterans Bond Act of 2000 for the purpose of
creating a fund to provide farm and home aid for veterans in
the amount of $500 million (MilVets §998.300, et seq.).
This bill:
1.Subject to voter approval on the November 2014 ballot, reduces
the Proposition 12 bonding authority for the CalVet Home Loan
Program from $900 million to $300 million and authorizes
issuance of $600 million in GO bonds for the acquisition,
construction, rehabilitation, and preservation of affordable
multifamily supportive housing, affordable multifamily
transitional housing, or related facilities and services for
veterans and their families.
2.Uses existing definitions from the Health and Safety Code to
define "supportive housing" [HSC §1504.5 (c) (2)] and
"transitional housing" [HSC §50675.2(h)].
3.Establishes a program board consisting of the California
Housing Finance Agency (CHFA), Department of Housing and
Community Development (HCD), and CalVet that:
a. Establish and implement programs for the above
purposes.
b. Approve issuance of Notices of Funding Availability.
c. Review and score responses from the Notices of Funding
Availability.
d. Score project applications.
4.Establishes the Housing for Veterans Finance Committee, solely
for the purpose of authorizing the issuance and sale of the GO
bonds authorized by the program. Provides that the Committee
consists of the Controller; Treasurer; Director of Finance;
Secretary of Business, Consumer Services, and Housing; and
Secretary of Veterans Affairs, or their designated
representatives. Designates the Treasurer as Committee chair.
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5.Requires - no later than March 4, 2015 - that CalVet enter
into a memorandum of understanding with HCD and CHFA to
address their respective and shared responsibilities in
implementing, overseeing, and evaluating the program and to
provide it to both budget committees of both legislative
houses.
6.Provides that program funds be expended in a manner that
focuses on veterans at risk of homelessness or experiencing
temporary or chronic homelessness. To the extent feasible,
the expenditures shall also leverage other public, private,
and non-profit resources, prioritize projects that combine
housing and supportive services, promote public and private
partnerships, and foster innovative financing opportunities.
7.Establishes a stakeholder process for developing program
guidelines that shall include, but not be limited to,
organizations that have experience providing housing or
homeless services, or both, to veterans, housing developers,
and public and private agencies that serve the veteran
population.
8.Allows the Legislature to amend, by majority vote, the
provisions of the voter-approved act for the purpose of
improving program efficiency, effectiveness, and
accountability or for the purpose of furthering overall
program goals.
9.Appropriates from the General Fund an amount necessary to pay
the principal and interest on the bonds and subjects HCD's
expenditures to legislative appropriation.
10. Requires HCD's annual report to include an
evaluation, in collaboration with CalVet, of any program
established by the department to implement this bill.
11. Contains an urgency clause.
BACKGROUND
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CalVet Home Loan Program
CalVet has been making low-interest financing available to
qualified veterans since 1921, and to date, more than 430,000
veterans have benefited from loans provided by the CalVet
Program.
CalVet finances new and existing single-family homes, farms,
condominiums and mobilehomes on land owned by the veteran or in
rental parks by acquiring property selected by the veteran and
reselling the property to the veteran under a land sale contract
(Contract of Purchase). Under a Contract of Purchase, the
veteran holds an equitable interest, and CalVet holds legal
title to the property. The program also provides home
improvement loans, construction loans and conditional commitment
(rehabilitation) loans. There are no purchase price restrictions
on the properties which can be purchased with CalVet bond funds,
nor are there income limitations on the veteran borrower.
The program is financed by bonds. While those bonds are GO
bonds, they operate more like revenue bonds in that they are
repaid by CalVet loan holders through the payment of principal
and interest on their loans. The bonds are backed by the full
faith and credit of the State of California and must be
authorized by a vote of the people at a statewide election. The
GO bonds used to finance the program are 30-year bonds we set up
all new loans for 30-year terms.
CalVet is a "full service" lender. Veterans can obtain direct
financing through the program, as well as loan servicing and
certain home protection coverage (Fire and Hazard insurance,
Disaster Indemnity coverage for earthquake and flood, and Life
and Disability insurance through a policy with an independent
vendor).
To be eligible for a CalVet loan, an individual must have
received a discharge classified as Honorable or Under Honorable
Conditions, and served a minimum of 90 days active duty (not
including active duty for training purposes only). There are
exceptions to the 90 days service requirement for veterans who:
Were discharged sooner due to a service-connected
disability, or
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Are eligible to receive a U.S. military campaign or
expeditionary medal, or
Were called to active duty from the Reserves or National
Guard due to a Presidential Executive Order.
Current members of the California National Guard or the US
Military Reserves who have served a minimum of one year of a six
year obligation are also eligible provided they qualify as first
time home buyers or purchase properties located in certain
targeted areas
CalVet home loans are funded through the sale of tax-exempt
bonds. The CalVet Home Loan program has been totally
self-supporting and no taxpayer funds have been used to repay
its bonds.
Program-eligible housing
Historically, the program has focused on traditional,
single-family residential structures; however, veterans' housing
needs have changed somewhat in recent decades as the state
becomes increasingly urbanized and less rural and the lingering
effects of the economic downturn.
In 2010 the Legislature enacted AB 2087 (Torres), which expands
the definition of "home" under the provisions of the Home Loan
program to include residences with two to four units.
In 2011 the Legislature enacted AB 1084 (Davis), which (1)
Expands the definition of loan-eligible "cooperative housing
corporation" to include a shared equity cooperative. The
National Association of Housing Cooperatives describes
cooperative housing as "the coming together of people in a
democratic basis to own or control the housing and/or community
facilities in which they live." Typically this is accomplished
by establishing a not-for-profit corporation. Like any
corporation, ownership of the assets (real estate) is
accomplished through ownership of stock in the company. Rather
than paying a mortgage payment each month, each tenant
(stockowner) pays his or her share of the total operating costs
of the corporation. Benefits to the veteran under such an
arrangement include establishing personal income tax deductions,
lower turnover rates, lower real estate tax (in some local
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areas), controlled maintenance costs, and resident participation
and control.
Declining program participation
While the Home Loan program has assisted over 430,000 veterans
over the years, it has seen a sharp decline in activity over the
last decade. This decline is due to both the economic recession
and the fact that interest rates offered under CalVet program
are not competitive with interest rates offered by commercial
lenders. In 2003, the program issued 1,130 new loans; in 2012 it
issued just 83. In the same time period, the program's portfolio
of outstanding loans declined from 20,169 to 7,913.
Veterans' nontraditional housing needs
In reviewing this bill, the Assembly Committee on Housing and
Development observed:
"Despite California's high number of homeless veterans, the
state does not have any programs that are directly targeted at
serving this population, or at serving lower-income veterans
who are at risk of homelessness. HCD offers various programs
that support the development of multifamily rental housing for
low income Californians, including supportive and transitional
housing, but none are veteran-specific. HCD's programs have
been funded since 2002 from two voter-approved housing bonds,
Proposition 46 of 2002 and Proposition 1C of 2006. These funds
are nearly gone and it is unclear when additional funds will be
available for these programs. In addition, the elimination of
redevelopment agencies meant a loss of around $1 billion per
year in affordable housing funding, funds that generally worked
in concert with state dollars and other sources of funding to
produce affordable units to serve low-income Californians."
Supportive Housing
Supportive housing is permanent rental housing linked to a range
of support services designed to enable residents to maintain
stable housing and lead fuller lives. There is no limit on
length of stay. Supportive housing is linked to onsite or
offsite services that assist the resident in retaining the
housing, improving individual health status, and maximizing the
ability to live and, when possible, work in the community.
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Transitional Housing
Transitional housing is a type of supportive housing used to
facilitate the movement of homeless individuals and families to
permanent housing. A homeless person may live in a transitional
apartment for a specified period of time, while receiving
supportive services that enable independent living. These are
buildings configured and operated as rental housing
developments, but are operated under program requirements that
call for the termination of assistance and recirculation of the
housing unit to another eligible program participant at some
predetermined future point in time - which shall be no less than
six months and often capped at two years. The intent is to
provide extended shelter and supportive services for homeless
individuals and/or families with the goal of helping them live
independently and transition into permanent housing.
COMMENT
Author comments :
According to the author, CalVet has roughly $1.1 billion in
remaining bond authority for its Home Loan Program and is doing
little new business while a growing body of research indicates
an overwhelming and unmet need for affordable, supportive,
multifamily housing for veterans. California leads the nation
in the number of homeless veterans and is home to one quarter of
all the nation's homeless veterans. This bill will restructure
Proposition 12, the CalVet bond of 2008, to allow for the
development of multifamily housing for veterans, with a priority
for projects that align housing with services. At the same
time, the bill preserves over $500 million in Proposition 32 and
Proposition 12 bonding authority for the CalVet Home Loan
Program to meet future needs. Ultimately, the bill will reduce
the number or homeless veterans and contribute to a
comprehensive, coordinated, and cost-effective approach to
respond to the full spectrum of housing and service needs of our
veterans.
Committee staff comments :
1.The voters approved Proposition 32 in 2000, which authorized
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$500 million in bonds, and Proposition 12 in 2008 which
authorized $900 million in bonds. To date, CalVet has about
$230 million in bonding authority left under Proposition 32
and has not issued any of the bonds approved under Proposition
12. This reflects the decline in program participation. In
2003, the program issued 1,130 new loans; in 2012 it issued
just 83.
2.If this bill is enacted, the existing CalVet Home Loan Program
will retain approximately $300 million dollars in bond
authority and continue to function.
3.Although not prohibited by law, it has been the custom and
practice of the Legislature not to use bond proceeds to
provide services. This bill would allow the voters to
expressly authorize bond proceeds to provide services for this
specific program.
4.Late informal input (paraphrased) from the State Treasurer's
Office passed through the Senate Committee on Governance and
Finance:
"The bill does not contain a provision stating that only
tax-exempt bonds could be issued, which would be very
unusual. If so, the Treasurer's Office would only issue tax
exempt bonds for projects/purposes that are eligible for
tax-exempt financing. For any projects/purposes that are
not eligible for tax-exempt financing, they would issue
taxable bonds."
That input may not reflect the latest amendments and so this
matter should be clarified if senators have concerns.
5.If enacted by the voters this measure would allow the
Legislature to amend its provisions by majority vote. How
broad would a future Legislature's flexibility be in
repurposing these funds?
6.The "board" established in §998.542 of this bill is unnamed.
Assigning it a formal name would help clearly affiliate it
with this particular program in the interest of public
clarity. One recommendation is the "Veterans Housing and
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Homeless Prevention Board." Also, the board does not have an
assigned chairperson. Since the Treasurer chairs the Housing
for Veterans Finance Committee," perhaps the Secretary of
Veterans Affairs should chair the "board" in order to provide
administrative balance.
7.Regarding the fiscal impact on State General Fund: As noted by
Senate Transportation and Housing:
"(T)he current CalVet bonds act like revenue bonds.
(CalVet) repays them with mortgage payments from its
borrowers, and the state's General Fund is a backstop that
has never been called on. In order to make multifamily
housing rents, particularly those for homeless veterans,
affordable, public loans must minimize or eliminate debt
service payments by deferring principal and interest
payments to the end of the loan term. As a result, there
will be no amortized mortgage payments with which (CalVet)
or HCD can repay the bonds and that responsibility will
fall to the General Fund. The Assembly Appropriations
Committee estimates that annual debt service on the bonds
this bill authorizes will amount to $25 million per year,
depending on interest rates."
Related Legislation
AB 1084 (Davis, Ch. 377, Stats. 2011)
(1) Expands the definition of loan-eligible "cooperative
housing corporation" to include a shared equity cooperative,
as defined. (2) Establishes a continuous appropriation,
without regard to fiscal year, to CalVet to make shared equity
cooperative housing loans.
AB 2087 (Torres, Ch. 542, Stats. 2010)
Expands the definition of "home" under the provisions of the
CalVet Home Loan program to include residences with two to
four units.
AB 1330 (Salas, Ch. 524, Stats. 2009)
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Authorizes CalVet to (1) establish a pilot project for the
purpose of operating a cooperative housing project; (2) work
in conjunction with the Department of Housing and Development;
(3) use existing home loan funds; (4) limit use and occupancy
of the cooperative housing to military veterans and their
families for at least 55 years.
SB 595 (Cedillo, held in Senate Appropriations, 2009)
Would have (1) enacted the Homeless Veterans Housing and
Supportive Services Act of 2010, which would authorize
issuance of $1,500,000,000 in GO bonds. (2) Dedicated proceeds
to be used to finance supportive housing projects for homeless
veterans, or veterans at risk of homelessness, with incomes
below limits to be established. (3) Submitted the bond act for
voter approval on the November 2, 2010, statewide general
election ballot.
AB 3067 (Salas, held w/o vote in Senate Veterans Affairs, 2008)
Would have created a housing rental program for veterans,
which would be administered by CalVet.
AB 2670 (Salas, Ch. 322, Stats. 2008)
Authorizes CalVet to apply to the California Debt Limit
Allocation Committee for the issuance of a private activity
bond under the qualified residential rental project program.
AB 2266 (Committee on Veterans Affairs, Ch. 834, Stats. 2004)
Adds Cooperative housing to the definition of "home" as used
for the CalVet Home Loan Program.
POSITIONS
Sponsor: Author
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Support:
Affirmed Housing Group
American Federation of State, County, and Municipal Employees
American Legion - Department of California
AMVETS - Department of California
Association for Los Angeles Deputy Sheriffs
Association of California Health Care Districts
Attorney General Kamala Harris
Burbank Housing Development Corporation
California Association of County Veterans Service Officers
California Association of Veteran Service Agencies
California Building Industry Association
California Conference of Carpenters
California Hospital Association
California Housing Consortium
California Housing Partnership Corporation
California Judges Association
California Labor Federation
California Latino Legislative Caucus
California Medical Association
California Nurses Association
California Professional Firefighters
California Rural Legal Assistance Foundation
California Special Districts Association
California State Association of Counties
California State Commanders Veterans Council
California State Council of Service Employees
California State Sheriff's Association
Century Housing
City and County of San Francisco
City of Azusa
City of Burbank
City of Los Angeles
City of Murrieta
City of Oakland
City of Sacramento
City of San Jose
Corporation for Supportive Housing
County of Butte
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County of Del Norte
County of Los Angeles
County of San Bernardino
County of Santa Clara
Housing California
JP Morgan Chase
League of California Cities
Los Angeles Area Chamber of Commerce
Los Angeles County Probation Officers Union
Los Angeles Homeless Services Authority
Los Angeles Police Protective League
Los Angeles Regional Reentry Partnership
New Directions
Riverside Sheriff's Association
Salvation Army Haven
San Diego Housing Commission
San Diego Housing Federation
Southern California Edison
St. Anthony Foundation
State Building and Construction Trades Council of California
State Treasurer Bill Lockyer
Swords to Plowshares
United Native Housing Development Corporation
United States Veterans Initiative
United Way of Greater Los Angeles
Urban Counties Caucus
Veterans of Foreign Wars - Department of California
Vietnam Veterans of America - California State Council
Western Center on Law and Poverty
Oppose: None received
Analysis by: Wade Cooper Teasdale
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