BILL ANALYSIS �
SB 391
Page 1
Date of Hearing: August 30, 2013
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 391 (DeSaulnier) - As Amended: August 8, 2013
Policy Committee: Labor and
Employment Vote: 5-2
Housing and Community Development 4-2
Urgency: Yes State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes the California Homes and Jobs Act of 2013
(the Act) to provide funding for affordable housing.
Specifically, this bill:
1)Beginning January 1, 2014, imposes a $75 fee on every real
estate instrument, paper or notice required or permitted by
law, excluding documents recorded in connection with a
transfer that is subject to a documentary transfer tax.
2)Requires the fee, minus any administrative costs of the county
recorder for collection, to be transferred quarterly to the
Department of Housing and Community Development (HCD) and
deposited into the Homes and Jobs Trust Fund.
3)Allows money in the Trust Fund, upon appropriation by the
Legislature, to be used to support the development,
acquisition, rehabilitation and preservation of housing
affordable to low-and moderate-income households, as
specified.
4)Requires HCD, in consultation with the California Housing
Finance Agency, the California Tax Credit Allocation Committee
and the California Debt Limit Allocation Committee to develop
a California Homes and Jobs Trust Fund Investment Strategy.
5)Requires HCD to submit the first investment strategy to the
Legislature as part of the Governor's May Revise of the Budget
Act in 2014-15 and every five years after as part of the
Budget Act beginning in 2019-20.
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6)Requires the Bureau of State Audits to conduct periodic audits
to ensure that the annual allocation to individual programs is
awarded in a timely fashion beginning two years from the
bill's effective date.
FISCAL EFFECT
1)The fee imposed by this bill would generate unknown revenue
ranging from $300 million to $720 million per year depending
on the volume of recorded documents.
2)Estimated annual administrative costs would be approximately
$5.4 million to fund up to 47 positions at HCD, which would be
fully covered by the fees.
3)Costs would be in the range of $250,000 to $350,000 in 2016-17
for BSA to conduct an initial audit, with ongoing periodic
audit costs in the range of $150,000 to $250,000. All BSA
audit costs would be fully covered by the fees.
4)The allocation of the funds is 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 and is subject to legislative appropriation.
COMMENTS
1)Purpose. According to the author, everyone in California
needs a safe and affordable place to call home. The author
states affordable rents and mortgages that are within the
reach of working families are critical to maintaining
California's business competitiveness. According to the
author, U.S. military veterans, former foster youth, families
with children, people with disabilities, seniors on fixed
incomes and other vulnerable Californians, are still in a
housing crisis. The author argues millions of Californians
are caught in the perfect storm of mortgages remaining out of
reach, credit standards tightening and the foreclosure crisis
pushing more people into a rental market already suffering
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from decades of short supply. The author concludes, the most
vulnerable who struggled to make rent before the foreclosure
crisis, face even more uncertainty in today's rental market
and they risk joining the over 130,000 Californians who are
homeless on any given night.
2)Support. Supporters, including the United Ways of California,
argue the California Homes and Jobs Act is an ongoing funding
source that helps the state live within its means. It
increases California's supply of affordable homes, creates
jobs and spurs economic growth without incurring additional
debt. The act imposes a $75 fee on documents related to real
estate transactions, excluding home sales. Supporters also
note the act will create 29,000 jobs annually, primarily in
the beleaguered construction sector, leverage an additional
$2.78 billion in federal, local and private investment and
build nearly build nearly 10,000 affordable apartments and
single-family homes a year for Californians in need, including
families, seniors, veterans, people with disabilities, and
people experiencing homelessness.
Business groups including the Orange County Business Council
and the Silicon Valley Leadership Group 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.
3)Opposition . Opponents contend the proposed fee established by
this bill has no relation to affordable housing and places
additional financial burdens on ordinary Californians. They
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 address unsatisfied customers.
The California Credit Union League (CCUL) argues that the new
tax imposed by this bill would result in their members having
to incur additional costs when refinancing their home loans or
looking to modify their home loans. CCUL states that during
these difficult times, when credit unions are trying to keep
their members in their homes and are recording a variety of
different real estate documents in order to do so, it is very
important that we do not increase costs on credit union
members who want to take advantage of these services.
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Finally, the Associated Builders and Contractors of California
(ABC) contends this bill essentially mandates the use of a
project labor agreement because it exempts projects with a
project labor agreement from reimbursing DIR for prevailing
wage enforcement costs. ABC contends the use of a project
labor agreement usually results in higher construction costs
for taxpayers.
4)Background. Historically, the state has invested in low- and
moderate-income housing primarily by providing funding for
construction. Because of the high cost of land and
construction and the subsidy needed to keep housing affordable
to residents, affordable housing is expensive to build.
Developers typically use multiple sources of financing,
including voter-approved housing bonds, state and federal
low-income housing tax credits, private bank financing, and
local matching dollars.
Voter-approved bonds have been an important source of funding
to support the construction of affordable housing. Proposition
46 of 2002 and Proposition 1C of 2006 together provided $4.95
billion for affordable housing. 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. Nearly all of these funds have
been awarded.
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. In fiscal year
2009-10, redevelopment agencies collectively 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.
5)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, which are documents
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made in connection with the sale of real property. from the
new fee. There are many types of documents that fall under
the proposed fee including deeds and grant deeds, notices of
default, easements and quitclaim deeds.
6)Tax or fee? While SB 391 states that the charge it imposes is
a fee, Legislative Counsel keyed earlier version of the
measure a tax increase for the purposes of Section III of
Article XIIIA of the California Constitution. As such, the
measure requires the approval of 2/3 of the membership of the
Senate and the Assembly to be enacted. Prior to 2010,
specified fees could be enacted by majority vote, but this
authority was significantly limited by Proposition 26 (2010).
The bill also contains an urgency clause and an amendment to a
continuous appropriation, both of which require a 2/3 vote.
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081