BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 90 (Chau) - Federal Housing Trust Fund
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|Version: April 22, 2015 |Policy Vote: T. & H. 11 - 0 |
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|Urgency: No |Mandate: No |
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|Hearing Date: July 13, 2015 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 90 would designate the Department of Housing and
Community Development (HCD) as the agency responsible for
administering the federal Housing Trust Fund (HTF).
Fiscal
Impact:
One-time HCD costs of approximately $589,000 in FY 2015-16 for
4.5 PY of staff time to develop a program for distribution of
federal HTF funds (General Fund). It is likely that these
funds could be reimbursed from the initial distribution of
federal funds, which is expected in 2016-17.
On-going HCD costs in the range of $1 million in 2016-17 for 9
AB 90 (Chau) Page 1 of
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PY of staff time for program evaluation, development, and
administration (federal funds). HCD's ongoing administrative
costs would be adjusted annually, based upon expected
allocations of federal HTF funds. All costs are expected to
be below the ten percent allowance for administrative costs
that may be retained by HCD from federal HTF allocations.
Ongoing HCD local assistance expenditures of approximately $40
million, beginning in 2016-17 (federal funds). Amounts of HTF
funds available for expenditure are dependent upon federal
formulas and the aggregate amount of mortgages funded through
specified federal entities (see below).
Background: The federal Housing and Economic Recovery Act (HERA) of 2008
was major federal housing legislation enacted to reform and
improves the regulation of Fannie Mae and Freddie Mac,
strengthen neighborhoods hardest hit by the foreclosure crisis,
enhance mortgage protection and disclosures, and maintain the
availability of affordable home loans. HERA established the
Federal Housing Trust Fund (HTF) and other affordable housing
programs, to be funded by an annual set-aside amount equal to
4.2 basis points (0.42 percent) of each dollar of unpaid
principal balance of the combined new business purchases of
Fannie Mae and Freddie Mac.
The purpose of HTF is to provide grants to state governments to
increase and preserve the supply of rental housing for extremely
low- and very low-income families, including homeless families,
and to increase homeownership for extremely low- and very
low-income families. Through the program, states will receive
grants (pursuant to a need-based formula), of which at least 80
percent must be used for rental housing, up to 10 percent may be
used for homeownership, and up to 10 percent may be retained by
the grantee for reasonable administrative and planning costs.
HTF funds may be used for the production or preservation of
affordable housing through the acquisition, new construction,
reconstruction, and/or rehabilitation of specified housing.
The Federal Housing Finance Authority suspended Fannie Mae and
Freddic Mac contributions for affordable housing programs after
AB 90 (Chau) Page 2 of
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they were placed in conservatorship in 2008, but recently
reinstated the contributions. It is anticipated that funds will
be available for allocation to states as soon as the summer of
2016.
Proposed Law:
AB 90 would designate HCD as the agency responsible for
administering the federal HTF and implementing federal
regulations. The bill would also do the following:
Require 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,
except that up to 10 percent of funds may be used to support
homeownership for extremely low- and very low-income
households.
Require that any rental project funded from the federal HTF
must restrict affordability for 55 years, and requires that
any homeownership project funded from the federal HTF must
restrict affordability for 30 years.
Require HCD, in collaboration with the California Housing
Finance Agency (CalHFA), to develop an allocation plan that is
informed by a specified stakeholder process and based on the
priority needs identified in the state's consolidated plan.
Require HCD to submit the allocation plan to the Legislature's
housing policy committees thirty days after receiving HTF
funds
Require the allocation plan to give priority to projects based
on geographic diversity, affordability of rents (especially to
extremely low-income households), the merits of a project, the
applicant's readiness, and the extent to which projects will
use nonfederal funds.
Require HCD to add an evaluation of any program established to
meet federal HTF program guidelines to its annual report to
the Governor and Legislature.
Staff
Comments: HCD's ongoing administrative costs would depend upon
the amount of annual federal allocations to California.
According to the most recent available estimates, Fannie Mae and
Freddie Mac are expected to contribute approximately $350
million to the federal HTF in 2015. HCD estimates that
approximately $41 million will be allocated to California in
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2016. Based upon tasks associated with administering current
state programs that provide funding for low-income rental
housing construction and homeownership programs, the Multifamily
Housing Program (MHP) and CalHOME Program, respectively, HCD
estimates annual administrative costs in the range of $1
million. This is based upon the assumption that a $41 million
allocation of HTF funds would generate approximately 25
applications, and funding would be provided for seven rental
projects and three homeownership projects. Although federal
regulations allow states to retain up to 10 percent of a federal
allocation for administrative purposes, HCD would incur General
Fund costs in 2015-16 to develop the program prior to receiving
federal funding. First year costs for program development would
likely be eligible for reimbursement from the initial federal
allocation in 2016-17.
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