BILL ANALYSIS Ó AB 90 Page 1 Date of Hearing: April 15, 2015 ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT Ed Chau, Chair AB 90 (Chau) - As Amended April 6, 2015 SUBJECT: Federal Housing Trust Fund. SUMMARY: Designates the Department of Housing and Community Development (HCD) as the agency responsible for administering the federal Housing Trust Fund (HTF). Specifically, this bill: 1)Requires HCD to administer the HTF funds through programs that produce, rehabilitate, or support the operation of rental housing for extremely low- and very low-income households. 2)Allows up to 10% of the HTF funds to be used to support first-time homeownership for extremely low- and very low-income households. 3)Requires that any project funded from the federal HTF must be restricted to fifty-five years affordability. 4)Requires HCD, in collaboration with the California Housing Finance Agency (CalHFA), to develop an allocation plan to show how the HTF funds will be spent based on the priority needs AB 90 Page 2 identified in the state's consolidated plan. 5)Requires HCD to submit the allocation plan to the Assembly Committee on Housing and Community Development and the Senate Committee on Transportation and Housing thirty days prior to receiving the HTF funds. 6)Requires the allocation plan to give priority to projects based on the following: a) Geographic diversity; b) The extent to which rents are affordable, especially to low-income households; c) The merits of a project; d) Applicants readiness; and e) The extent to which projects will use nonfederal funds. 1)Requires HCD to convene a stakeholder process to inform the allocation plan and to include organizations that provide rental housing to extremely low- and very low-income households or assist extremely low- and very low-income households to become homeowners. EXISTING LAW: Federal law defines extremely low-income households as households with incomes between zero and 30% of area median income and very low-income families' incomes as AB 90 Page 3 between 30% and 50% of area median income. FISCAL EFFECT: Unknown. COMMENTS: Background : The Public Policy Institute of California has identified that more than 36% of mortgaged homeowners and 47% of all renters are spending more than 35% of their household incomes on housing. In California we have about 134,000 homeless people living in our streets, parks, alleys, and freeway off-ramps. At the same time vacancy rates are low and rents are increasing. According to the U.S. Department of Housing and Urban Development, California has six of the most expensive rental markets in the country. Nationwide, rents in 2014 grew the fastest in the San Jose and San Francisco metropolitan areas, increasing by 14.4% and 13.5%, respectively. Between 2006 and 2011, rents increased throughout the state by an average of ten percent. Lower-income households represent a majority of renter households. Out of 5.1 million renters in California, 60% are in lower-income households, while one in four renter households are in the extremely low-income. One in two renters in California pay in excess of 30% of their income towards housing and one in four renters pay half of their income towards housing. The funding sources to support construction of affordable housing have drastically diminished over the last five years. The dissolution of redevelopment agencies eliminated up to $1 billion in funding that was available for affordable housing construction. The last statewide housing bond was approved in 2008 and the proceeds of those bonds have been exhausted. The Federal Housing Trust Fund : AB 90 Page 4 The Housing and Economic Recovery Act (HERA) of 2008 directed Fannie Mae and Freddie Mac to set aside 0.042% of new business for the federal HTF. Sixty-five percent was directed to the federal HTF and 35% to the Capital Magnet Fund. Before the funds could be directed toward the HTF, the banking and foreclosure crisis hit and funding for the program was put on hold. In December of last year, the Federal Housing Finance Agency lifted the suspension of funding and directed Fannie Mae and Freddie Mac to set aside funds for the HTF starting on January 1, 2015. It is anticipated that funds may be allocated as soon as the summer of 2016. The HTF is a permanent federal funding source for affordable housing and the funds must be used to produce, preserve, rehabilitate, or support the operation of rental housing for extremely low- and very low-income families, including homeless families, and for homeownership for extremely low- and very low-income families. Ninety percent of funding from the HTF must be used toward rental housing and up to 10% may be used toward homeownership. Additionally, seventy-five percent of funding must go toward extremely low-income families. Further, when there is only $1 billion available in the federal HTF then 100% of the funds must be used to benefit extremely low-income households. Based on estimates, for every $250,000 that is generated for the HTF, approximately $30 million will be allocated to California. Federal guidelines require that the HTF be distributed to states by a formula based on: Shortage and availability of rental housing for extremely-low income families and very-low income families; Number of extremely low- and very low-income families who are severely rent burdened or pay more than 50% of their income toward rent and utilities. Purpose of the bill : Each state is required to choose a state agency to administer the HTF. AB 90 establishes HCD as that agency and requires the AB 90 Page 5 department to develop a plan for how the funds will be spent. The federal guidelines require states to develop an allocation plan each year to show how the HTF will be distributed in the coming year. The allocation plan must be based on the priority needs identified in the state's consolidated plan. AB 90 aligns with the federal requirements to develop an allocation plan for how the fund will be allocated each year. Support unless amended : Habitat for Humanity supports the overall direction of AB 90, however they request that up to 10% of funds go to the CalHome Program. According to Habitat for Humanity, "after redevelopment agencies dissolved, CalHome became the primary source of state funding for Habitat for Humanity affiliates throughout the state. It provides grants to local public agencies or nonprofit corporations for first-time homebuyers, down payment assistance, and self-help homeownership." CalHome was funded by the two previous state voter-approved bonds but those fund are exhausted. REGISTERED SUPPORT / OPPOSITION: Support Bridge Housing California Building Industry (CBIA) California Infill Builders Federation California Housing Consortium California Rural Legal Assistance Foundation AB 90 Page 6 Habitat for Humanity Highridge Costa Housing Partners, LLC Highridge Costa Investors, LLC Housing California Leading Age California National Association of Social Workers California Chapter (NASW-CA) Non-Profit Housing Association of Northern California (NPH) San Diego County Apartment Association (SDCAA) Western Center on Law and Poverty Opposition None on file Analysis Prepared by: Lisa Engel/H. & C.D./(916) 319-2085 AB 90 Page 7