BILL ANALYSIS Ó AB 639 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 639 (John A. Pérez) As Amended September 4, 2013 2/3 vote. Urgency ----------------------------------------------------------------- |ASSEMBLY: |77-0 |(May 29, 2013) |SENATE: |36-0 |(September 10, | | | | | | |2013) | ----------------------------------------------------------------- Original Committee Reference: H. & C.D. SUMMARY : Authorizes the issuance of $600 million in general obligation (GO) bonds to fund the acquisition, construction, rehabilitation, and preservation of multifamily supportive housing, affordable transitional housing, affordable rental housing, and related facilities for veterans and their families, if approved by the voters at the June, 2014, statewide election. The Senate amendments : 1)Move the measure from the November 2014 ballot to the June 2014 ballot. 2)Remove all references to using bond proceeds to fund services. 3)Designate the Department of Veterans Affairs (CalVet), rather than the Department of Housing and Development (HCD), as the board for purposes of the State General Obligation Bond Law. 4)Require CalVet to carry out the board duties in consultation with HCD and the California Housing Finance Agency (CalHFA). 5)Require CalVet, HCD, and CalHFA (the departments) to work collaboratively under a memorandum of understanding (MOU) to implement the Veterans Housing and Homeless Prevention Act of 2014, as established by the bill. 6)Require the departments to enter into the MOU no later than August 15, 2014, to address their respective and shared responsibilities in implementing, overseeing, and evaluating the Veterans Housing and Homeless Prevention Act. 7)Require the departments to submit the MOU to the Senate and Assembly Budget Committees. AB 639 Page 2 8)Limit the total administrative costs of implementing the bill to 5% of the bonds issued. 9)Require the departments to ensure that program guidelines and terms provide threshold requirements or scoring criteria that benefit applicants with experience in combining permanent or transitional housing, or both, with supportive services for veterans or for partnering with housing developers or service providers with experience offering housing or services to veterans. 10)Require that 50% of the funds awarded for capital development serve extremely low-income households and that 60% of those units be supportive housing. 11)Require that all of a household's income sources upon initial tenancy be taken into consideration in determining whether a potential tenant is eligible for supportive, affordable, or transitional housing targeted to extremely low income households. 12)Allow the departments to fund projects consisting of fewer than five units, in addition to projects of five or more units. 13)Allow the departments to fund projects serving mixed-income populations. 14)Exempt any guidelines and terms developed to implement the bill from the Administrative Procedures Act. 15)Provide that the bill does not permit the departments to purchase, operate, or manage properties except in the event of a foreclosure on a borrower or grantee. 16)Require HCD, in its annual report to the Governor and the Legislature, to include an evaluation, in collaboration with CalVet, of any programs established to expend proceeds from the bonds. 17)Make technical and clarifying changes. AS PASSED BY THE ASSEMBLY , this bill was substantially similar to the version that was passed by the Senate. FISCAL EFFECT : According to the Senate Appropriations Committee: AB 639 Page 3 1)Total debt service of approximately $25 million annually (General Fund). 2)Approximately $220,000 in one-time ballot printing/mailing costs (General Fund). COMMENTS : Various studies indicate that veterans are more likely than the general population to become homeless, and make up a disproportionate share of the homeless population. Although veterans are only about 8% of the U.S. population, they make up approximately 15% to 20% of the homeless population. Veterans' homelessness is particularly acute in certain parts of the country, including California, which is home to 25%, or about 19,000, of the nation's homeless veterans. Los Angeles alone is home to over 8,000 homeless veterans. With respect to the nation's homeless veterans who are unsheltered, nearly 44% are located in California. In addition to the veterans who are already experiencing homelessness, there are many more veterans who have unstable housing situations that place them at risk of homelessness. For some, remaining housed may be as basic as having more affordable housing options. For others, the challenges are more complex and may involve a range of issues from lack of job training to needing ongoing treatment for substance abuse or mental health issues. Numerous studies have shown that providing housing along with the supportive services individuals need to address mental health, substance abuse, and other issues has a net benefit in terms of public costs. For example, in 2009, the Los Angeles Economic Roundtable compared the public costs for individuals in supportive housing compared to similar individuals who were homeless. The study concluded that the typical public cost for a homeless person is $2,897 per month, compared with just $605 per month in public cost for a resident in supportive housing. The stabilizing effect of housing plus supportive services is demonstrated by a 79% reduction in public costs. In short, public costs go down when people are no longer homeless. 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 AB 639 Page 4 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. 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 for lower-income Californians. CalVet runs the California Veteran Farm and Home Purchase Program, often referred to as the CalVet Home Loan Program, which was established in 1921 and reauthorized in 1943 and again in 1974. The program provides loans to veterans for single-family residences, including condominiums and planned unit developments; farms; units in cooperative developments; and mobilehomes in rental parks or on land owned by the veteran. While the program has assisted over 420,000 veterans over the years, it has seen a sharp decline in activity over the last decade. 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. CalVet's Home Loan Program is funded primarily by veterans' bonds, a type of tax-exempt GO bond. Although GO bonds are always backed by the full faith and credit of the state, the bonds issued for the CalVet home loan program are unusual because the payments made by the veterans participating in the program always have been sufficient to retire the bonds. The program has never had a General Fund cost. The Legislature has placed on the ballot and California voters have approved 23 veterans' bonds since 1943 to provide funding for the program. The most recent was Proposition 12 in 2008, which authorized $900 million in bonding authority. The prior bond, Proposition 32 of 2000, authorized $500 million in bonding authority. To date, CalVet has not issued any of the bonds approved under Proposition 12, and has about $230 million in bonding authority left under Proposition 32. This bill establishes the Veterans Housing and Homeless Prevention Bond Act of 2014 to restructure $600 million of the $900 million in bonds approved by the voters for the CalVet Home Loan Program in 2008 and use them to fund the acquisition, construction, rehabilitation, and preservation of multifamily supportive housing, affordable transitional housing, affordable rental housing, and related facilities for veterans and their families. The move would leave CalVet with $530 million in bonds for its home loan program. AB 639 Page 5 The bill tasks HCD, CalVet, and the California Housing Finance Agency with collaboratively administering the new funding program and restricts the use of bond proceeds to housing units designated for veterans and their families. Restructuring the bonds requires voter approval, which would be sought at the June 3, 2014, statewide election. Analysis Prepared by : Anya Lawler / H. & C.D. / (916) 319-2085 FN: 0002728