Amended in Assembly March 21, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1109

Introduced by Assembly Member Bonilla

February 22, 2013

An act to amend Section begin delete 50515.2 end delete begin insert 50802 end insert of the Health and Safety Code, relating to housing begin insert , and making an appropriation therefor end insert .

LEGISLATIVE COUNSEL’S DIGEST

AB 1109, as amended, Bonilla. begin delete Affordable housing. end delete begin insert Emergency housing and assistance. end insert

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Existing law requires the Department of Housing and Community Development to administer the Emergency Housing and Assistance Program. Under the program, moneys from the continuously appropriated Emergency Housing and Assistance Fund are available for the purposes of providing shelter, as specified, to homeless persons at as low a cost and as quickly as possible, without compromising the health and safety of shelter occupants, to encourage the move of homeless persons from shelters to a self-supporting environment as soon as possible, to encourage provision of services for as many persons at risk of homelessness as possible, to encourage compatible and effective funding of homeless services, and to encourage coordination among public agencies that fund or provide services to homeless individuals, as well as agencies that discharge people from their institutions.

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Existing law requires the department to distribute funds appropriated for activities providing for capital development programs, including acquisition, leasing, construction, and rehabilitation of sites for emergency shelter and transitional housing for homeless persons, as grants in the form of forgivable deferred loans, as prescribed. Existing law requires the department to terminate the grant and require the repayment of the deferred loan in full, if a transfer or conveyance of the project property that results in the property no longer being used as an emergency shelter or transitional housing occurs before the term of the loan expires.

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This bill would provide that when property is transitioned from an emergency shelter or transitional housing to permanent affordable housing, as specified, and serves people who are homeless or at risk of homelessness, an existing loan may be deferred and forgiven, as if the property had remained an emergency shelter or transitional housing. By authorizing the use of continuously appropriated funds for a new purpose, this bill would make an appropriation.

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Existing law authorizes the Department of Housing and Community Development to provide technical assistance to groups and persons with various housing needs and to administer various housing loan programs, including the Joe Serna, Jr. Farmworker Housing Grant Program.

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This bill would make technical, nonsubstantive changes to a provision of the Joe Serna, Jr. Farmworker Housing Grant Program.

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Vote:  begin delete majority end delete begin insert ²⁄₃ end insert . Appropriation:  begin delete no end delete begin insert yes end insert . Fiscal committee:  begin delete no end delete begin insert yes end insert . State-mandated local program: no.

The people of the State of California do enact as follows:

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begin insert SECTION 1. end insert   

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begin insert Section 50802 of the end insert begin insert Health and Safety Code end insert begin insert is
amended to read: end insert

50802.  

(a) The department shall ensure that not less than 20
percent of the moneys in the Emergency Housing and Assistance
Fund shall be allocated to nonurban counties during any given
fiscal year. If the funds designated for facilities operation that are
allocated to nonurban counties are not awarded by the end of that
fiscal year, then those unencumbered funds shall be allocated in
the next fiscal year to urban counties. Funds for capital
development that are not awarded by the end of the second fiscal
year shall be awarded in the subsequent fiscal year to urban
counties.

(b) The amount of funds that the department allocates from the
Emergency Housing and Assistance Fund to each region, excluding
funds allocated pursuant to subdivision (a), shall be based upon a
formula that accords at least 20 percent weight to each of the
following factors:

(1) The relative number of persons in the region below the
poverty line according to the most recent federal census, updated,
if possible, with an estimate by the Department of Finance,
compared to the total of the urban counties.

(2) The relative number of persons unemployed within each
region, based on the most recent one-year period for which data
is available, compared to the total of the urban counties.

(c) Grant funds shall be disbursed as expeditiously as possible
by the department.

(d) The department shall use not more than 5 percent of the
amount available for funds pursuant to this chapter to defray the
department’s administrative costs pursuant to this chapter.

(e) Notwithstanding any other provision of this chapter, the
department shall distribute funds appropriated for purposes of the
activities specified in paragraph (2) of subdivision (a) of Section
50803 as grants in the form of forgivable deferred loans, subject
to all of the following:

(1)  begin insert (A) end insert begin insert   end insert Funding shall be made available to each project as a
loan with a term of five years for rehabilitation, seven years for
substantial rehabilitation, or 10 years for acquisition and
rehabilitation or new construction. Each deferred loan shall be
secured by a deed of trust and promissory note. Repayment of the
loan shall be deferred as long as the project is used as an emergency
shelter or transitional housing. At the completion of the specified
year term, the loan shall be forgiven. If a transfer or conveyance
of the project property, however, occurs prior to that time that
results in the property no longer being used as an emergency shelter
or transitional housing, the department shall terminate the grant
and require the repayment of the deferred loan in full.

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(B) If the property is transitioned from an emergency shelter
or transitional housing to permanent affordable housing, including,
but not limited to, permanent supportive housing and rapid
rehousing, and serves people who are homeless or at risk of
homelessness, the loan may also be deferred and forgiven
according to subparagraph (A), as if it had remained an emergency
shelter or transitional housing.

end insert begin insert

(i) For purposes of this subparagraph, “permanent supportive
housing” has the same meaning as the term “supportive housing,”
as defined in paragraph (2) of subdivision (b) of Section 50675.14.

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(ii) For purposes of this subparagraph, “rapid rehousing”
means housing that focuses on moving homeless individuals and
families into appropriate housing as quickly as possible.

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(iii) For purposes of this subparagraph, “people who are
homeless” includes individuals described in Section 11302 of Title
42 of the United States Code, and paragraph (2) of subdivision
(e) of Section 11139.3 of the Government Code.

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(2) Applications for funding shall be made pursuant to
department-issued statewide “Notices of Funding Availability”
without the need for additional regulations.

(3) The department shall set forth the criteria for evaluating
applications in the “Notices of Funding Availability” and shall
make deferred loans based on those applications that best meet the
criteria.

(4) The department shall specify in the “Notice of Funding
Availability” both maximum and minimum grant amounts that
may be varied for urban and nonurban counties.

(5) Contracts for projects that have not begun construction
within the initial 12-month period shall be terminated and funds
reallocated. The department, however, may extend this period by
a period not to exceed 12 months.

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SECTION 1.  

Section 50515.2 of the Health and Safety Code
is amended to read:

50515.2.  

(a) Notwithstanding any other law, the department
may extend the term of an existing multifamily housing loan made
by the department under the original Rental Housing Construction
Program established by Chapter 9 (commencing with Section
50735), the Special User Housing Rehabilitation Program
established by Section 50670, or the Deferred Payment
Rehabilitation Loan Program established by Chapter 6.5
(commencing with Section 50660) upon the request of any
borrower subject to the following conditions:

(1) The borrower shall provide to the department a complete
report showing all existing tenants, their incomes, as reported in
the most recent annual income certification, and the rents currently
charged to each tenant.

(2) The borrower shall agree to an extension of the term of the
loan by an additional 55 years from the date of departmental
approval. If the department determines that the remaining useful
life of a project is less than 55 years, the loan may be extended for
the remaining useful life of the project, but not less than 30 years.
The department may convert the existing outstanding principal
and any accrued interest into the new loan amount. The interest
rate on the extended term shall be 3 percent simple interest. All
future payments of principal and interest may be deferred except
for a percentage of interest equal to the percentage charged in the
Multifamily Housing Program (Chapter 6.7 (commencing with
Section 50675)) for the department’s ongoing monitoring and
management responsibilities.

(3) The borrower shall agree to amend or replace the existing
regulatory agreement to include terms generally equivalent to those
used in the Multifamily Housing Program. In addition, the borrower
shall agree to replace, amend, or revise any other loan document
as necessary to accomplish the purposes of this section.

(4) (A) The borrower shall agree to a rent schedule that ensures
that all assisted units are affordable to households earning no more
than 60 percent of the area median income and that at least 35
percent of all assisted units shall be reserved for, affordable to,
and occupied by, households earning less than or equal to the
midlevel target used by the Multifamily Housing Program, unless
the department finds both of the following:

(i) That the project income is insufficient to maintain fiscal
integrity, as that term is used in the Multifamily Housing Program,
and is insufficient to maintain the rents required under this
subparagraph pursuant to the terms of the Uniform Multifamily
Regulations, or any successor regulations, except that commercial
vacancy loss shall be projected based on the operating history of
the project, commercial vacancy rates in the neighborhood, and
similar factors typically used by commercial lenders.

(ii) That the borrower has exhausted all available potential
sources of rental subsidies, including, but not limited to, federal,
state, and local funds.

(B) If the department finds that a reduction in the percentage
of assisted units to less than 35 percent of assisted units is justified,
it shall ensure that the largest possible percentage is reserved for
the targeted households.

(C) For the purposes of this paragraph, “midlevel target used
by the Multifamily Housing Program” means the following:

(i) For counties with an area median income of 110 percent or
less of the state median income, households earning 30 percent of
state median income, expressed as a percentage of area median
income.

(ii) For counties with an area median income that exceeds 110
percent of the state median income, households earning less than
35 percent of state median income, expressed as a percentage of
area median income.

(5) A tenant residing in a project at the time of an extension
authorized by this section may not be displaced as a result of the
regulatory revisions authorized by this section, and, for the initial
operating year after approval of the extension, that tenant may not
have his or her rent increased above the amounts specified in his
or her preexisting regulatory agreements, except that no tenant
may pay less than 30 percent of his or her income, calculated
pursuant to the Multifamily Housing Program criteria. If a rent
increase authorized under this section would exceed a 10 percent
increase in payment for a lower income tenant, the project owner
shall phase in the increase so that it does not exceed 10 percent
per year. After the initial operating year after the extension
authorized under this section, the rents for all regulated units that
are subject to the new agreement may be adjusted in the percentage
calculated pursuant to the Multifamily Housing Program criteria,
plus the amount necessary to bring an individual tenant up to the
30-percent-of-income standard, provided that the total annual
increase does not exceed 10 percent. Rent adjustments for all
tenants occupying assisted units at the time of the extension shall
be based on the tenant’s initial rent established under this
paragraph. Upon vacancy of an assisted unit occupied at the time
of the extension, the new base rent for that unit shall be established
consistent with the standards used in the Multifamily Housing
Program for the regulated income band, subject to the reservation
of units required under paragraph (4).

(b) The department may approve an extension of a loan made
by the department if it determines that the project has, or will have,
after rehabilitation or repairs, a potential remaining useful life of
at least 30 years and that the project is deemed financially feasible
pursuant to the terms of its Uniform Multifamily Regulations or
successor regulations.

(c) The department may subordinate its loan or loans to refinance
existing senior debt and to additional permanent financing if that
additional senior debt is used only for rehabilitation, repairs, or
improvements, or both, including related soft costs, that are modest
in size, scope, and cost, as determined by the department and
necessary to maintain and extend the useful life of the project.

(d) (1) For the purposes of this subdivision, the “agency
projects” are the 26 projects assisted through the original Rental
Housing Construction Program with funds administered by the
California Housing Finance Agency.

(2) Upon the request of a borrower the agency may extend the
term of an existing loan for an agency project by a period that is
equal to the remaining useful life of the project, as determined by
the agency, but not more than 55 years and not less than 30 years
from the date of agency approval, under terms that are substantially
consistent with the purposes of this section, if all of the following
conditions are met:

(A) The borrower shall provide to the agency the report
described in paragraph (1) of subdivision (a).

(B) The extension shall be subject to the conditions set forth in
paragraph (2) of subdivision (a).

(C) The rent levels and tenant protections described in
paragraphs (4) and (5) of subdivision (a) shall be satisfied, except
that the agency, not the department, shall make the determination
required under clause (i) of subparagraph (A) of paragraph (4) of
subdivision (a) that the project income is insufficient to meet the
agency’s affordable multifamily lending program requirements.

(3) Any determination or approval under this section regarding
the agency projects shall be by the agency rather than the
department.

(4) The borrower and the agency shall amend, replace, or revise
any other loan documents or agreements governing the loans for
the agency projects as necessary to accomplish the purposes of
this section.

(5) All funds received by the agency for the agency projects,
whether by loan repayment, foreclosure, accrued interest, or
otherwise, shall be used to provide assistance to existing or future
projects financed by or through the agency pursuant to terms
consistent with the agency’s affordable multifamily lending
programs.

(e) It is the intent of the Legislature in enacting this section that
the department should manage its reserves for the original Rental
Housing Construction Program in a manner that will allow for the
continuation of current benefits to current low-income tenants for
the longest period of time possible. Accordingly, rent subsidies
shall be continued only for units occupied by lower income tenants
who were in residence at the time of the extension authorized under
this section.

(f) It is the intent of the Legislature in enacting this section to
provide to the department the flexibility necessary to preserve the
affordable rental units for which the state has already made a
significant public investment. Accordingly, the department may
implement this section through guidelines that shall not be subject
to Chapter 2.5 (commencing with Section 11340) of Part 1 of Title
2 of the Government Code.

(g) This section shall become operative on July 1, 2008.

(h) This section shall not apply to loan extensions and senior
debt subordinations executed by the department and recorded after
the effective date of the guidelines adopted by the department
pursuant to subdivision (h) of Section 50560.

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