BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 723 (Chiu) - Housing: finance
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|Version: August 4, 2016 |Policy Vote: JUD. 4 - 2, T. & |
| | H. 11 - 0 |
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|Urgency: Yes |Mandate: No |
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|Hearing Date: August 11, 2016 |Consultant: Mark McKenzie |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 723, an urgency measure, would (1) authorize the
Department of Housing and Community Development (HCD) to allow
an applicant with one or more Community Development Block Grant
(CDBG) agreements, as specified, to apply for and receive
additional funds without having expended at least 50 percent of
their existing awards, and (2) modify California Housing Finance
Agency (CalHFA) statutes.
Fiscal
Impact:
Accelerated expenditure of CDBG funds, likely in the tens of
millions annually over several years (federal funds). Staff
notes that current regulations appear to be preventing the
expenditure of current available federal funds. Absent the
bill, future allocations of federal funding may be at risk.
AB 723 (Chiu) Page 1 of
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Minor and absorbable administrative costs to HCD (General
Fund) and Cal HFA (special funds).
Background: The California Housing Finance Agency (CalHFA) is an
independent entity within HCD that was established in 1975 and
makes low-rate housing loans through the sale of taxable and tax
exempt bonds. Historically, CalHFA has provided housing
assistance in three areas: (1) below-market interest rate
mortgages and downpayment assistance for first-time homebuyers,
most of whom were low- and moderate income families and ethnic
minorities not well-served by market rate products, (2)
insurance for single-family home purchase mortgages, and (3)
loans for the development of multifamily rental housing. These
financial products were funded through sale of revenue bonds
secured by the mortgage products and the underlying property.
The operating costs of the agency are funded by (1) origination
and service fees, and (2) the spread between the interest paid
on its outstanding debt and the interest charged on the loans
made. Beginning in 2002, passage of Proposition 46 (2002)
provided funding for additional activities through sale of
general obligation bonds; this source of funding was extended by
passage of Proposition 1C in 2006.
The CDBG program was established by the United States Housing &
Community Development Act of 1974 (HCD Act) and is administered
at the federal level by the U.S. Department of Housing and Urban
Development (HUD). In addition to the federal entitlement
grants that are provided directly to local agencies, existing
federal law authorizes each state to administer CDBG funds for
small cities and counties, called "non-entitlement areas."
Eligible applicants in "non-entitlement areas" include counties
with fewer than 200,000 residents in unincorporated areas and
cities with fewer than 50,000 residents that do not participate
in the HUD CDBG entitlement program. Since 1983, HCD has
administered the state CDBG program in California, and releases
a notice of funding availability each year including
CDBG-eligible activities. The state program awards grants to
non-entitlement areas to develop and preserve decent affordable
housing.
Current state regulations prohibit an applicant with one or more
current CDBG grant agreements signed in 2012 or later, for which
the expenditure deadline established in the grant agreement(s)
has not yet passed, from being eligible to apply for any
AB 723 (Chiu) Page 2 of
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additional CDBG funds, unless the applicant has expended at
least half of CDBG funds awarded previously (the 50% rule).
Proposed Law:
AB 723, an urgency measure, would do all of the following:
Permit HCD to allow an applicant with one or more CDBG
agreements, signed in 2012 or later, to apply for and
receive an award of funds without regard to whether the
applicant has expended at least half of their existing
awards. The awarding of funds under these circumstances
shall be (1) determined by the Director of HCD, and (2)
evaluated on the basis of eligibility, need, benefit, or
readiness.
Specify that CalHFA shall, in adjusting rents for
household size, have the option to utilize occupancy
assumptions that it determines to be appropriate and
commercially reasonable for financing.
Increase the occupancy eligibility for lower income
households from 50 percent to 80 percent area median income
(AMI) in multifamily rental housing developments financed
by CalHFA.
Remove existing references to the use of the sale of
bond proceeds to finance CalHFA programs.
Provide that, upon approval of the CalHFA board, CalHFA
may waive the priority requirements for very low-income
households in federally targeted areas upon a determination
that the housing needs of a substantial number of lower
income households will not otherwise be met.
Staff
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Comments: According to HUD, California currently has five times
its most recent grant amount, approximately $114 million, in the
state's CDBG line of credit, which HUD calls "unprecedented."
HCD attributes this backlog of unspent funds to the 50% rule.
This rule is intended to incentivize local jurisdictions to
expeditiously spend down their available funds. This bill would
authorize the allocation of additional CDBG funds to local
agencies that have unspent funds that exceed 50% of their
previous allocation. This would accelerate expenditure of the
current balance of HCD's CDBG funds.
The provisions pertaining to CalHFA are not expected to result
in additional state costs, but would modernize the agency's
governing statutes, providing additional flexibility in meeting
the needs of low- and moderate-income renters and allowing
CalHFA to participate in the financing of more mixed income
projects.
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