BILL ANALYSIS Ó SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 391 SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Desaulnier VERSION: 4/2/13 Analysis by: Mark Stivers FISCAL: yes Hearing date: April 9, 2013 SUBJECT: California Homes and Jobs Act of 2013 DESCRIPTION: This bill imposes a fee of $75 on the recording of each real estate-related document, except for those documents recorded in connection with a transfer subject to a documentary transfer tax, and directs the money to the California Homes and Jobs Trust Fund. The Legislature may then appropriate these funds for the development, acquisition, rehabilitation, and preservation of homes affordable to low- and moderate-income households, including emergency shelters, transitional and permanent rental housing, foreclosure mitigation, and homeownership opportunities. ANALYSIS: Current law establishes a number of programs at the Department of Housing and Community Development (HCD) and the California Housing Finance Agency (CalHFA) to make housing more affordable to California families and individuals, including the following main programs: Multifamily Housing Program, which funds the new construction, rehabilitation, and preservation of permanent and transitional rental homes for lower income households through loans to local governments, non-profit developers, and for-profit developers. Joe Serna, Jr., Farmworker Housing Program, which funds the development of ownership or rental homes for agricultural workers through grants to local governments and non-profit organizations. Emergency Housing Assistance Program, which funds emergency shelters and transitional homes for homeless individuals and SB 391 (DESAULNIER) Page 2 families through grants to counties and non-profit entities for rehabilitation, renovation, expansion, site acquisition, and equipment. CalHome Program, which funds downpayment assistance, home rehabilitation, counseling, self-help mortgage assistance programs, and technical assistance for self-help and shared housing through grants and loans. California Homebuyer Downpayment Assistance Program, which aids first-time homebuyers with down payment and/or closing costs. Historically, the state has funded these programs through the sale of general obligations bonds. Most recently, the voters approved a $2.1 billion bond through Proposition 46 in 2002 and then a $2.85 billion bond through Proposition 1C in 2006. These funds financed the construction, rehabilitation, and preservation of 57,220 affordable apartments, including 2,500 supportive homes for people experiencing homelessness, and over 11,600 shelter spaces. In addition, these funds have helped 57,290 families become or remain homeowners. HCD has awarded almost all of the funds made available under these propositions, particularly in these main programs. Until 2011, the Community Redevelopment Law required redevelopment agencies to set aside 20% of all tax increment revenue to increase, improve, and preserve the community's supply of low- and moderate-income housing available at an affordable housing cost. In fiscal year 2009-10, redevelopment agencies deposited $1.075 billion of property tax increment revenues into their Low- and Moderate-Income Housing Funds. With the elimination of redevelopment agencies, this source of funding for affordable housing is no longer available. This bill imposes a fee of $75 on the recording of each real estate-related document, except for those documents recorded in connection with a transfer subject to a documentary transfer tax, and directs the money to the California Homes and Jobs Trust Fund. The Legislature may then appropriate these funds for the development, acquisition, rehabilitation, and preservation of homes affordable to low- and moderate-income households, including emergency shelters, transitional and permanent rental housing, foreclosure mitigation, and homeownership opportunities. The Legislature may also appropriate up to 5% of the funds for administering housing SB 391 (DESAULNIER) Page 3 programs that receive an appropriation from the fund. The bill further requires HCD to report annually to the Legislature on the expenditure of these funds and the Bureau of State Audits to conduct periodic audits to ensure that state agencies award appropriated funds in a timely fashion consistent with legal requirements. COMMENTS: 1.Purpose of the bill . According to the author, everyone in California needs a safe and affordable place to call home. For U.S. military veterans, former foster youth, families with children, people with disabilities, seniors on fixed incomes, and other vulnerable Californians, however, the housing crisis isn't over. Millions of Californians are caught in the "perfect storm" - mortgages remain out of reach, credit standards have tightened, and the foreclosure crisis has pushed more people into a rental market already suffering from decades of short supply - leading to record-setting rent increases. The most vulnerable, who struggled to make rent before the foreclosure crisis, face even more uncertainty in today's rental housing market. They risk joining the more than 130,000 Californians who are homeless on any given night. Moreover, rents and mortgages within the reach of working families are critical to maintaining California's business competitiveness. Numerous business groups say California needs to increase the supply of housing options affordable to workers so companies can compete for the talent that drives California's economy. At the same time, California's investment in affordable homes has dried up. State agencies have awarded nearly all of the voter-approved bond funding for affordable housing. Likewise, the elimination of redevelopment agencies has cut off funding from the low- and moderate-income housing set aside. The California Homes and Jobs Act begins to restore California's historic investments in affordable homes by creating an ongoing, pay-as-you-go source of funding dedicated to affordable housing development. The act will: Create 29,000 jobs annually, primarily in the beleaguered construction sector. Help businesses attract and retain the talent that fuels SB 391 (DESAULNIER) Page 4 California's economy. Leverage an additional $2.78 billion in federal and local funding and bank loans to build affordable homes and create jobs. Deploy these dollars in California communities through a successful private/public partnership model. Get California building again to create affordable home options for all Californians. 1.Exempts documents related to sale transactions . In order to promote homeownership opportunities, this bill exempts documents made in connection with the sale of real property from the new fee. This will ensure that transaction costs do not increase for homebuyers. 2.Revenue projections . Based on recording data from a variety of past years, it is estimated that this bill will generate an average of $525 million per year for the Homes and Jobs Trust Fund, ranging from $300 million per year in low-volume years to $750 million per year in high-volume years. 3.Allocation to be determined . This bill requires that monies in the Homes and Jobs Trust Fund go for the development, acquisition, rehabilitation, and preservation of homes affordable to low- and moderate-income households, including emergency shelters, transitional and permanent rental housing, foreclosure mitigation, and homeownership opportunities. Aside from these general parameters, however, this bill does not allocate funds to particular programs or uses. Instead, it leaves the decision on allocation to the Legislature. This provides less certainty but ensures that funds can address priority housing needs as they change through the years. Nonetheless, it is the author's intent that these monies fund a variety of housing needs, ranging from homeless shelters and permanent supportive housing to rental housing to homeownership, and, where possible, use established and well-understood programs. 4.Types of documents covered . This bill applies the $75 fee to the recording of all real estate-related documents except those recorded in connection with a transfer subject to the imposition of a documentary transfer tax and those expressly exempted from payment of recording fees. There are many types of documents that fall under the proposed fee, including, but not limited to: SB 391 (DESAULNIER) Page 5 Deeds and grant deeds Trustees' deeds and deeds of trust Amendments of deeds of trust Quit claim deeds Fictitious deeds of trust Assignments of deeds of trust Construction trust deeds Reconveyances Easements Maps Lot line adjustments Covenants, conditions, and restrictions Affidavits Abstracts of judgment Subordination agreements Declarations and abandonments of homestead Requests for notice of default Notices of default Notices of trustee sale Substitution of trustee Trustee's deed upon sale Notices of completion Notice of rescission of declaration of default Liens Releases or discharges Leases and assignments of leases Assignments of rents Uniform Commercial Code amendment, assignment, continuation, statement, or termination 1.Two-thirds vote required . Legislative Counsel has determined that this bill would result in a change in state taxes for the purpose of increasing state revenues within the meaning of Section 3 of Article XIIIA of the California Constitution and thus requires a 2/3 vote for passage. 2.Arguments in opposition . The Orange County Board of Supervisors states that the proposed fee has no relation to affordable housing and places additional financial burdens on ordinary Californians. The County Recorders Association of California and its members point out that some recordings or transactions involve more than one document, in which case the per-document fee will add to the already substantial cost of recording. In addition, county recorders will encounter significant increases in staff time to collect fees and SB 391 (DESAULNIER) Page 6 address unsatisfied customers. 3.Double referral . The Rules Committee has referred this bill to both this committee and the Governance and Finance Committee. PRIOR LEGISLATION SB 1220 (DeSaulnier) of 2012 was substantively identical to this bill. SB 1220 received 25 votes on the Senate Floor but needed 27 for passage. POSITIONS: (Communicated to the committee before noon on Wednesday, April 3, 2013.) SUPPORT: California Housing Consortium (sponsor) Housing California (sponsor) AARP Abode Communities A Community of Friends Alameda County Developmental Disabilities Council Alpha Construction Company AMCAL Multi-Housing American Baptist Homes of the West Amstutz Associates Angelus Plaza Asian Pacific Environmental Network Association of Regional Center Agencies Asthma Coalition of Los Angeles County Bay Area Business Roundtable Bay Area Community Land Trust Bay Area Council BRIDGE Housing Burbank Housing Development Corporation Cabrillo Economic Development Corporation Cahill Contractors California Apartment Association California Association of Housing Authorities California Association of Local Housing Finance Agencies California Building Industry Association California Coalition for Rural Housing California Coalition for Youth SB 391 (DESAULNIER) Page 7 California Conference of Carpenters California Council of Community Mental Health Agencies California Disability Services Association California Housing Partnership Corporation California Partnership to End Domestic Violence California Police Chiefs Association California Reinvestment Coalition California Rural Legal Assistance Foundation Casa Major Century Housing Century Villages at Cabrillo CHISPA City of Emeryville City of Lynwood City of Oakland City of Oxnard City of Pasadena City of San Joaquin City of San Jose City of Santa Barbara City of Santa Monica City of West Hollywood Coachella Valley Housing Coalition Community Corporation of Santa Monica Community Health Improvement Partners Community Housing Opportunities Corporation Community Housing Works Corporation for Supportive Housing County of Alameda County of Contra Costa Curtom-Dunsmuir Domus Development EAH Housing East Bay Developmental Disabilities Legislative Coalition East Bay Housing Organizations East LA Community Corporation Eden Housing Enterprise Community Partners Environmental Health Coalition Episcopal Community Services of San Francisco First Place for Youth Foundation for Affordable Housing Gonzalez Goodale Architects Habitat for Humanity California Habitat for Humanity Greater San Francisco Habitat for Humanity Inland Valley SB 391 (DESAULNIER) Page 8 Habitat for Humanity Pomona Valley Habitat for Humanity Riverside Habitat for Humanity San Gabriel Valley Habitat for Humanity San Luis Obispo County Habitat for Humanity Santa Cruz County Hamilton Family Center Highridge Costa Housing Partners Hollywood Community Housing Corporation Home Builders Association of Tulare/Kings Counties Home Start Homes for Life Foundation Housing Authority for the City of San Buenaventura Housing Choices Coalition for People with Developmental Disabilities Housing Leadership Council of San Mateo County ICON Builders InnerCity Struggle Interfaith Community Services International Association for Women of Color Day Jamboree Housing Corporation John Stewart Company Kennedy Commission The KTGY Group Larkin Street Youth Services Laurin Associates Lauterbach and Associates LeSar Development Consultants LifeSTEPS LINC Housing Loaves and Fishes Local Initiatives Support Corporation Los Angeles Area Chamber of Commerce Los Angeles Business Council Los Angeles Business Leaders Task Force on Homelessness Los Angeles Community Action Network L.A. Family Housing LA Voice Law Foundation of Silicon Valley Leading Age California League of Women Voters of California Lutheran Office of Public Policy Mammoth Lakes Housing Marin Workforce Housing Trust Mental Health America of Los Angeles Mercy Housing MidPen Housing Corporation SB 391 (DESAULNIER) Page 9 Multicultural Communities for Mobility Nancy Lewis Associates National Community Renaissance National Housing Law Project Natural Resources Defense Council Neighborhood Housing Services of Los Angeles County Neighborhood Partnership Housing Services NeighborWorks Orange County Non-Profit Housing Association of Northern California Northern Circle Indian Housing Authority Northern California Community Loan Fund Opportune Companies Orange County Business Council Orange County Housing Trust Pacific Clinics Palm Communities Pasadena Public Health Department Peninsula Interfaith Action Penny Lane Centers People Assisting the Homeless Peoples' Self-Help Housing Corporation PolicyLink Public Advocates Related California Resources for Community Development Ruiz Brothers Construction Co. Rural Community Assistance Corporation Rural Communities Housing Development Corporation Sacramento Homeless Organizing Committee Sacramento Housing Alliance St. Joseph Center St. Paul's Senior Home and Services San Benito County Housing and Economic Development Department San Gabriel Valley Consortium on Homelessness San Luis Obispo County Housing Trust Fund Self-Help Enterprises Service Employees International Union (SEIU) California State Council Sierra Business Council Sierra Club California Silicon Valley Leadership Group Skid Row Housing Trust Sonoma County Task Force for the Homeless Southeast Asian Community Alliance Southern California Association of Non-Profit Housing SPUR SB 391 (DESAULNIER) Page 10 Stand Up for Neighborly Novato State Treasurer Bill Lockyer Step Up on Second Sun Country Builders Sunseri Construction Tenderloin Neighborhood Development Corporation Thai Community Development Center Thomas Safran and Associates Turning Point Community Programs United Homeless Healthcare Partners United States Veterans Initiative United Ways of California United Way of Fresno County United Way of Greater Los Angeles Valley Economic Development Center Venice Community Housing Corporation Visionary Home Builders Wakeland Housing and Development Corporation Walton Construction Services Western Center on Law and Poverty OPPOSED: Butte County Clerk-Recorder Calaveras County Clerk-Recorder Colusa County Clerk Recorder County Recorders' Association of California County of Orange El Dorado County Recorder-Clerk Inyo County Clerk Recorder Marin County Assessor-Recorder-Clerk Nevada County Clerk-Recorder Plumas County Clerk San Bernardino County Recorder-Clerk San Luis Obispo County Clerk-Recorder Sonoma County Clerk-Recorder-Assessor Stanislaus County Clerk-Recorder